Thailand: Municipal Finance Reform and Training

By Kelley, Joe | Government Finance Review, October 1994 | Go to article overview

Thailand: Municipal Finance Reform and Training


Kelley, Joe, Government Finance Review


The Government Finance Officers Association has been in the forefront of municipal finance reform since its inception in 1906. Recently, it has become instrumental in assisting local government finance reform in the country of Thailand, as well.

The history of government in Thailand is quite the reverse of the American experience. In the United States, government began as local agreements covering the extent of a village. As settlements were amalgamated into colonies, the strong character of local decision making remained. The revolutionary war established that the 13 colonies were not part of the British Empire, but it took more than a decade of experimentation to create a federal government with a Constitution explicitly establishing rights that belonged to the states. Thus, governmental thinking in the U.S. began on a local level and over time evolved to encompass the idea of limited central control.

In Thailand, government has always flowed from the top down and from the center out. Decisions on all sorts of issues, whether on national defense or local annexations, were traditionally made at the seat of government, Bangkok. Local finances reflect this central control: more than half of a municipality's budget comes from the national government and more than half of all local employees are officially employees of the national government. Mayors, city counselors and laborers alone are not central government employees.

Such a centralized system may have been adequate to handle the problems of a slow-changing nation, but Thailand has been developing with stunning speed and shows no signs of stopping. It has been described as an "emerging Asian tiger" because of its explosive growth. As the economy has multiplied, so have the problems--problems ill-suited to centralized decision making.

Decentralizing Government Authority

In Bangkok in mid-1994, construction cranes are everywhere, giving visual meaning to the economists' announcement that growth for the year will exceed the original estimate of 8 percent. Thailand has been experiencing growth of at least this magnitude every year for more than a decade. The result has been a rising skyline and growing environmental problems.

In all of Thailand, with its population of some 60 million people, there are but three operating wastewater treatment plants and one more under construction. Solid waste disposal efforts are hamstrung by a land inflation rate that can exceed 25 percent per year in some cities. Road construction is hampered by a pay-as-you-go approach that keeps local government debt near zero and actual construction to small segments each year. Thailand's water supplies are inadequate for the current population, which is only 32 percent urbanized, and might be overwhelmed if significant numbers of rural dwellers should abandon rice farming as unprofitable and move to the cities--a condition that some forecasters expect to occur.

Thailand is a land of opportunity that has yet to face up to the environmental impact of its massive development, but that may be changing. The Regional Housing and Urban Development Office (RHUDO) of the U.S. Agency for International Development, in cooperation with the Thailand Ministry of the Interior's Department of Local Administration and the Ministry of Finance, is sponsoring efforts to encourage Thai municipalities to become more active in solving local problems with local resources. In line with this approach, RHUDO sponsored a training program on improving financial management and revenue enhancement for local governments in Thailand and contracted to bring two members of the GFOA staff and a city official to Thailand to deliver the training.

The training is organized to support a decision of the Royal Thai Government (RTG) to strengthen municipal governments and expand local decision-making authority. Thailand's history of central control over local government has resulted in many local decisions being made by agencies in Bangkok, while municipalities are substantially dependent on operating and capital grants from the RTG.

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