OECD MULTI-DIMENSIONAL COUNTRY REVIEW - THAILAND INITIAL ASSESSMENT REPORT

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OECD MULTI-DIMENSIONAL COUNTRY REVIEW - THAILAND INITIAL ASSESSMENT REPORT Bangkok, 9 April 2018 OECD Team for MDCR of Thailand http://www.oecd.org/eco/surveys/multi-dimensional-review-thailand.htm

Main messages Sustained economic growth has brought about impressive social progress. However, there remain development constraints across each of the 5 pillars of the sustainable development goals (SDGs). Further reform is needed to meet the SDGs and transition to an inclusive, high-income country. 2

People: Towards better lives for all 3

Regional inequalities have narrowed but remain pronounced 15 Regional GDP per capita gap Thailand s ratio between the richest and poorest region 10 5 0 1995 2000 2005 2010 2015 Regional GDP per capita gap 20 15 Ratio between the richest and poorest region, 2015 10 5 0 Korea OECD average China Thailand Malaysia Indonesia Source: Panel A: Thailand National Statistical Office (2014), Economic Indicators; Panel B: calculations based on OECD (2013a), OECD Regional Database, and national statistical office data from Thailand, Malaysia and Indonesia 4

Precarious employment remains widespread 60 % of precarious employment in total employment, 2017 50 40 30 20 10 0 Singapore South Africa OECD Poland Korea Malaysia Mexico Turkey China Philippines Colombia Thailand Indonesia Vietnam Source: World Bank, World Development Indicators 5

1400 The old-age allowance alone cannot guarantee income security for the elderly Monthly universal old-age allowance by age, THB 1200 1000 800 600 400 200 0 60 65 70 75 80 85 90 95 100+ Universal old age allowance National poverty line Source: Schmitt, V., T. Sakunphanit and O. Prasitsiriphon (2013) Note: The national poverty line refers to the minimum monthly cost of basic food. 6

Social protection is comparatively well targeted but still disproportionately benefits the non-poor 0.18 0.16 0.14 0.12 0.1 0.08 0.06 0.04 0.02 Social Protection Index, 2013 Non Poor Poor 0 Indonesia Philippines Thailand Viet Nam China Singapore Malaysia Korea Source: Asian Development Bank (2013), The Social Protection Index Assessing Results for Asia and the Pacific, Mandaluyong. Note: The Social Protection Index (SPI) is total expenditures on social protection divided by the total number of intended beneficiaries of all social protection programmes, normalised by poverty-line expenditures (which for cross-country comparability purposes is set uniformly at 25% of GDP per capita). A SPI of 0.10 would thus be equivalent to 2.5% of GDP per capita. A higher SPI denotes better social protection. 7

The quality of education needs to improve 550 Maths Reading Science PISA scores 550 Maths Reading Science 510 510 470 470 430 430 390 390 350 2003 2006 2009 2012 2015 350 Indonesia Thailand Malaysia OECD average Viet Nam China Source: OECD (2016b), PISA: Programme for International Student Assessment; OECD Education Statistics (database). Note: China refers to the four PISA-participating Chinese entities: Beijing, Shanghai, Jiangsu and Guangdong. Coverage of Malaysian schools in PISA 2015 fell short of the standard PISA response rate so results may not be comparable to those of other countries. 8

Too few students graduate in courses meeting industry needs 45 40 Enrolment ratio in STEM subjects, Latest available year, % 35 30 25 20 15 10 5 0 Thailand South Africa Indonesia Viet Nam OECD Turkey Poland Colombia Mexico Korea Malaysia Singapore Source: UNESCO-UIS (2017), Education (dataset), UIS Data Centre, http://data.uis.unesco.org/. Note: STEM courses include natural sciences, mathematics and statistics programmes; information and communication technology programmes; and engineering, manufacturing and construction programmes. 9

People - key constraints and selected recommendations Social protection system excludes many informal workers Inadequate pension benefits Encourage formalisation through tax and regulatory measures. Harmonise social protection schemes Index non-contributory allowance for older people to minimum required living costs Poor education outcomes Strengthen teacher capacity, curriculum coherence, student assessment procedures and ICT use in schools Large skills mismatches Expand co-operation between vocational institutions, academia and the private sector in course development 10

Prosperity: Boosting productivity 11

Faster growth is needed to catch up 100 GDP per capita, % of OECD average, computed at 2016 PPP USD 90 80 70 60 50 40 30 20 10 0 1970 1980 1990 2000 2010 2016 Indonesia Malaysia Philippines Korea Thailand Viet Nam Source: Conference Board (2017), Total Economy Database, Datastream, and OECD calculation Note: In 2016, Thailand s per capital GDP in USD PPP was 17 359, versus an OECD average of 41 776 12

Labour productivity can be boosted Average labour productivity growth per employee per year % 14 12 10 8 6 4 2 0-2 OECD average South Africa Mexico Korea Colombia Malaysia Poland Singapore Turkey Thailand Philippines Indonesia Viet Nam China 2001-05 2006-10 2011-16 Source: OECD calculations based on data provided by national statistical office and Datastream; OECD, Productivity Statistics database 13

R&D outlays remain below some comparators Gross expenditure on R&D, % of GDP, 2015 % 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 2011 level 2021 target 0.0 Indonesia Philippines Colombia Viet Nam Mexico Thailand South Africa Poland Turkey Malaysia China Singapore OECD Korea Note: The 2% R&D expenditure target included in the STI Plan was subsequently revised down in the 12th Plan to 1.5%. 2013 for Indonesia, Philippines, Viet Nam, and South Africa, 2014 for Turkey and Singapore. Source: UNESCO-UIS (2017), Science, Technology and Innovation (dataset); UIS data Centre; OECD, Gross domestic spending on R&D 14

There are high barriers to services trade Pilot exercise of OECD Services Trade Restrictiveness Index 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Construction services Regulatory transparency Barriers to competition Other discriminatory measures Restrictions on the movement of people Restrictions on foreign entry Average STRI 2014 CHL KOR JPN DEU LVA IRL CZE NZL GBR LTU AUS NLD FRA ZAF LUX EST DNK SVK ITA SVN POL ESP FIN AUT CAN BRA USA CRI SWE COL PRT HUN MEX TUR BEL CHN CHE GRC NOR RUS IND ISR THA IDN ISL Architecture services Regulatory transparency Barriers to competition Other discriminatory measures Restrictions on the movement of people Restriction on foreign entry Average STRI 2014 LVA CHL DNK JPN AUS NLD KOR USA LTU SWE NZL IRL DEU COL CAN LUX NOR MEX FIN ESP CHN GRC GBR ZAF BRA CRI CZE ITA TUR RUS CHE IDN AUT HUN ISR BEL ISL SVN EST PRT THA POL FRA SVK IND Note: Full openness to trade in services gives a score of zero, while complete closure to foreign services providers gives a score of one. Source: OECD (2017), Services Trade Restrictiveness index database 15

Prosperity - key constraints and selected recommendations Slow economic advancement, notably in the agriculture sector Low innovation and commercially viable research SME development is constrained by costly financing High cross-border barriers to services trade and investment Invest in lifelong learning and skills training Upgrade business skills and foster greater ICT use in agriculture Ensure institutional coordination. Boost public R&D spending to no less than 1.5% of GDP by 2021, as planned Create a lower-cost bourse in the stock exchange Improve co-ordination across agencies responsible for SMEs development Review regulations on foreign business operations including restrictions on foreign firms entry and movement of people 16

Partnerships: Sustainably financing development 17

The population is ageing rapidly 0.6 0.5 Elderly dependency ratio 0.4 0.3 0.2 0.1 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 OECD average Regional comparators Thailand Note: The elderly dependency ratio refers to the number persons (aged 65 and above) per working age population (aged 15 to 64). Regional comparators refers to the average elderly dependency ratio for Malaysia, Philippines, Indonesia and Viet Nam. Source: UN Population projections, 2017 revision. 18

Fiscal revenue will need to rise % of GDP 45 40 General government revenue in % of GDP, average over 2011-15 35 30 25 20 15 10 5 0 Indonesia Singapore Philippines Thailand Korea Viet Nam Mexico Malaysia Colombia China South Africa Turkey Poland OECD Source: Datastream, OECD Revenue Statistics (2017) 19

There is room to improve PPP processes 100 PPP preparation PPP procurement PPP contract management Average 80 60 40 20 Malaysia Turkey Thailand Poland Indonesia China Singapore Viet Nam Colombia Korea Mexico South Africa Philippines Note: The higher the score, the more aligned with international best practice. Scores for unsolicited proposals are not considered in the above analysis as Thailand, Malaysia, Turkey, Poland and Singapore do not have any regulatory procedures. Source: World Bank Group/PPIAF (2017), Benchmarking Public-Private Partnerships Procurement 2017. 20

Partnerships - key constraints and selected recommendations Revenue needs to increase to fund future commitments Boost tax efficiency, increase compliance and rely more heavily on less distortive taxes Inefficient and costly infrastructure financing Make greater use of alternative infrastructure financing such as Thai baht infrastructure bonds Align PPP policies with OECD Principles for Public Governance of PPPs Escalating public healthcare and pension burdens Invest in preventative and primary care. Reduce exemptions to healthcare copayments Increase pensionable age 21

Planet: Conserving nature 22

Droughts and floods affect many areas % 100 A. Share of provinces affected by drought or flooding Drought Flooding 85 70 55 40 % 50 40 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 B. Share of agricultural land affected by drought or flooding Drought Flooding 2009 2010 2011 2012 2013 2014 2015 Source: NESDB (2017), Social and Quality of Life Database System, http://social.nesdb.go.th/social/default.aspx?tabid=40; OAE (2017), Agricultural Statistics of Thailand 2016. 23

Towards better waste management Municipal waste Kilograms per capita 1600 1400 1200 1000 800 600 400 200 0 Philippines Colombia Poland Mexico Korea Turkey Thailand OECD Singapore Source: OECD countries from OECD (2017); Thailand from PCD (2017b); Philippines and Singapore from http://unstats.un.org/unsd/environment/qindicators.htm 24

Coal will form a bigger part of power generation by 2036 2015 2036 Natural gas Imported coal Lignite Renewable Imported hydropower Domestic hydropower Nuclear Source: MOE (2016), Thailand Integrated Energy Blueprint. 25

Emissions have increased 3.0 2.5 Kg per 2010 USD CO 2 per GDP 2015 1990 2.0 1.5 1.0 0.5 0.0 Colombia Singapore OECD Turkey Indonesia Mexico Philippines Korea Poland Thailand Malaysia China South Africa Viet Nam Source: IEA (2017), CO2 Emissions from Fuel Combustion 2017 Edition. 26

Planet - key constraints and selected recommendations Management of water resources is fragmented Floods and droughts often cause economic disruption Pollution and inadequate waste management undermine environmental quality Power sector plans will lead to a more carbon intensive path Environmental issues are not well integrated into public plans and policies Ensure co-ordination across existing agencies, at all levels of governance Improve disaster prevention and response capacity at the local level to effectively provide services Make polluters pay more directly, including wastewater tariffs on water usage Step up investments in renewables and consider increasing environmental taxation Carry out Strategic Environmental Assessments more frequently and effectively 27

Peace: Strengthening governance 28

Improving reform implementation 4 Capacity for State reform Long-term strategies 3 2 1 0 South Africa Thailand Indonesia Mexico Turkey Singapore OECD Average Korea China Poland Colombia Malaysia Philippines Note: Capacity for State reform measures the authorities ability to decide and actually implement reforms (scores range from 0 for very low capacity to 4 for strong capacity). Long-term strategies indicate whether the public authorities have a long-term strategic vision (scores range from 0 for very weak strategic vision to 4 for strong strategic vision). Source: Centre d Études Prospectives et d Informations Internationales, Institutional Profiles Database 2016 29

Improving government online presence 100 90 Government's online service Online e-participation 80 70 60 50 40 30 20 10 0 Indonesia Thailand South Africa Viet Nam Turkey Philippines Poland Malaysia China Colombia OECD Average Mexico Korea Singapore Note: The higher the score, the closer to world best practice Source: Cornell University et al. (2017), Global Innovation Index 30

Local governments rely heavily on revenue from the central government Local government revenue sources, 2016 Locally collected revenue 11% Central government: VAT redistribution 39% 17% Central government: other tax redistribution Central government: grant funding 33% Source: Fiscal Policy Office 31

Corruption persists 90 Corruption perception index, 2017 80 70 60 50 40 30 20 10 0 Note: Index ranges from 0 (highly corrupt) to 100 (very clean). Source:Transparency International Corruption Perception Index (2017), https://www.transparency.org/news/feature/corruption_perceptions_index_2017 32

Peace - key constraints and selected recommendations Lacking institutional capacity Imbalance between central and local government Review role of ministries and clarify responsibilities across all levels of government Pursue decentralisation by empowering local administrations Weak enforcement of competition law Strengthen capacity of the Trade Competition Commission Corruption remains problematic Further strengthen existing integrity measures and streamline the anticorruption mandates of various institutions 33

For more information, please see Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. http://www.oecd.org/eco/surveys/multi-dimensional-review-thailand.htm @OECD Economics @OECD 34