Presentation of the OECD 2018 Multi-Dimensional Country Review of Thailand

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

Regional GDP per capita gap

2005

2010

2015

Ratio between the richest and poorest region, 2015

20 15 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 % of precarious employment in total employment, 2017 60 50 40 30 20

Source: World Bank, World Development Indicators

Vietnam

Indonesia

Thailand

Colombia

Philippines

China

Turkey

Mexico

Malaysia

Korea

Poland

OECD

South Africa

0

Singapore

10

5

The old-age allowance alone cannot guarantee income security for the elderly Monthly universal old-age allowance by age, THB 1400 1200

1000 800 600

400 200 0

60

65

70

75

80

Universal old age allowance Source: Schmitt, V., T. Sakunphanit and O. Prasitsiriphon (2013) Note: The national poverty line refers to the minimum monthly cost of basic food.

85

90

95

100+

National poverty line 6

Social protection is comparatively well targeted but still disproportionately benefits the non-poor Social Protection Index, 2013

0,18

Non Poor

0,16

Poor

0,14 0,12 0,1

0,08 0,06 0,04 0,02

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

PISA scores Maths

Reading

Science

550

510

510

470

470

430

430

390

390

350

2003

2006

2009

2012

2015

350

Maths

Indonesia

Thailand

Reading

Malaysia

OECD average

Science

Viet Nam

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.

China

8

Too few students graduate in courses meeting industry needs Enrolment ratio in STEM subjects, Latest available year, %

45 40 35

30 25 20 15

10

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.

Singapore

Malaysia

Korea

Mexico

Colombia

Poland

Turkey

OECD

Viet Nam

Indonesia

South Africa

0

Thailand

5

9

People - key constraints and selected recommendations Social protection system excludes many informal workers

• Encourage formalisation through tax and regulatory measures. Harmonise social protection schemes

Inadequate pension benefits

• 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 GDP per capita, % of OECD average, computed at 2016 PPP USD

100 90

80 70 60 50 40 30 20 10

0

1970

Indonesia

1980

Malaysia

1990

Philippines

Korea

2000

Thailand

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

2010

2016

Viet Nam 12

Labour productivity can be boosted Average labour productivity growth per employee per year 14

%

12

10 8

6 4

2

2001-05

2006-10

China

Viet Nam

Indonesia

Philippines

Thailand

Turkey

Singapore

Poland

Malaysia

Colombia

Korea

Mexico

South Africa

-2

OECD average

0

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 2021 target

1,5

2011 level

1,0

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

Korea

OECD

Singapore

China

Malaysia

Turkey

Poland

South Africa

Thailand

Mexico

Viet Nam

Colombia

Philippines

0,0

Indonesia

0,5

14

There are high barriers to services trade Pilot exercise of OECD Services Trade Restrictiveness Index 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

0,7 0,6 0,5 0,4 0,3 0,2 0,1 0

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

0,7 0,6 0,5 0,4 0,3 0,2 0,1 0

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

• Invest in lifelong learning and skills training • Upgrade business skills and foster greater ICT use in agriculture

Low innovation and commercially viable research

• Ensure institutional coordination.

• Boost public R&D spending to no less than 1.5% of GDP by 2021, as planned

SME development is constrained by costly financing

• Create a lower-cost bourse in the stock exchange • Improve co-ordination across agencies responsible for SMEs development

High cross-border barriers to services trade and investment

• 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

Elderly dependency ratio

0,5 0,4 0,3 0,2 0,1 0

1950

1960

1970

OECD average

1980

1990

2000

2010

Regional comparators

2020

2030

2040

2050

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 General government revenue in % of GDP, average over 2011-15 % of GDP 45 40 35 30 25

20 15 10

OECD

Poland

Turkey

South Africa

China

Colombia

Malaysia

Mexico

Viet Nam

Korea

Thailand

Philippines

Singapore

0

Indonesia

5

Source: Datastream, OECD Revenue Statistics (2017) 19

There is room to improve PPP processes PPP preparation

100

PPP procurement

PPP contract management

Average

80

60

Philippines

South Africa

Mexico

Korea

Colombia

Viet Nam

Singapore

China

Indonesia

Poland

Thailand

Turkey

20

Malaysia

40

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 A. Share of provinces affected by drought or flooding % 100

Drought

Flooding

85 70 55

40

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

B. Share of agricultural land affected by drought or flooding Drought Flooding

% 50 40 30 20

10 0

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

Source: OECD countries from OECD (2017); Thailand from PCD (2017b); Philippines and Singapore from http://unstats.un.org/unsd/ENVIRONMENT/qindicators.htm

OECD

Singapore 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 CO2 per GDP

Kg per 2010 USD 3,0 2015

1990

2,5 2,0 1,5

1,0

Viet Nam

South Africa

China

Malaysia

Thailand

Poland

Korea

Philippines

Mexico

Indonesia

Turkey

OECD

Singapore

0,0

Colombia

0,5

Source: IEA (2017), CO2 Emissions from Fuel Combustion 2017 Edition.

26

Planet - key constraints and selected recommendations Management of water resources is fragmented

• Ensure co-ordination across existing agencies, at all levels of governance

Floods and droughts often cause economic disruption

• Improve disaster prevention and response capacity at the local level to effectively provide services

Pollution and inadequate waste management undermine environmental quality

• Make polluters pay more directly, including wastewater tariffs on water usage

Power sector plans will lead to a more carbon intensive path

• Step up investments in renewables and consider increasing environmental taxation

Environmental issues are not well integrated into public plans and policies

• Carry out Strategic Environmental Assessments more frequently and effectively 27

Peace: Strengthening governance

28

Improving reform implementation Capacity for State reform

4

Long-term strategies

3

2

Philippines

Malaysia

Colombia

Poland

China

Korea

OECD Average

Singapore

Turkey

Mexico

Indonesia

Thailand

0

South Africa

1

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

Government's online service

Online e-participation

90 80 70 60 50 40 30

20

Note: The higher the score, the closer to world best practice Source: Cornell University et al. (2017), Global Innovation Index

Singapore

Korea

Mexico

OECD Average

Colombia

China

Malaysia

Poland

Philippines

Turkey

Viet Nam

South Africa

Thailand

0

Indonesia

10

30

Local governments rely heavily on revenue from the central government Local government revenue sources, 2016 Locally collected revenue Central government: VAT redistribution

11%

39%

17%

Central government: other tax redistribution

Central government: grant funding

33%

Source: Fiscal Policy Office

31

Corruption persists Corruption perception index, 2017 90

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 Weak enforcement of competition law Corruption remains problematic

• Review role of ministries and clarify responsibilities across all levels of government • Pursue decentralisation by empowering local administrations

• Strengthen capacity of the Trade Competition Commission • 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