Report No. 23147-TH Thai land Social Monitor: Poverty and Public Policy November 2001 Human Development Sector Unit East Asia and Pacific Region Document of the World Bank KINGDOM OF THAILAND - FISCAL YEAR October I - September 30 CURRENCY EQUIVALENTS (as of November 5, 2001) Currency Unit = Baht (B) US$1.00 = B 44.69 ABBREVIATIONS AusAID - The Australian's Government Overseas Aid Program BAAC - Bank of Agriculture and Agricultural Cooperatives BMN - Basic Minimum Need CERCAP - Community Empowerment for Response to Crisis Action Plan CODI - Community Organization Development Institute CSOs - Civil Society Organizations DED - Development of Evaluation Division DPW - Department of Public Welfare FGT indices - Foster-Greer-Thorbecke incides GDP - Gross Domestic Product IGTI - Inequality-Growth Tradeoff Index JBIC-Japan - Japan Bank For Intemational Cooperation MERI - Mekong Environment and Resource Institute MOI -Ministry of Interior MP - Member of Parliament NGOs - Non-Govemment Organizations NESDB - National Economic and Social Development Board NRDC - National Rural Development Committee NSO - National Statistical Office NSPC - National Social Policy Committee OLS - Ordinary Least Square SES - Social-Economic Survey SIF - Social Investment Fund SNA - System of National Accounts SSA - Social Security Administration TDRI - Thailand Development Research Institute Thai-UNCAP - Thailand-United Nations Collaborative Action Plan UCDO - The Urban Community Development Office UNDP - United Nations Development Programme UNICEF - United Nations International Children's Emergency Fund VWACs - Village Welfare Assistance Centers Vice President: Mr. Jemal-ud-din Kassum Country Director: Mr. Ian C. Porter Sector Directors: Ms. Maureen Law/Mr. Homi Kharas Task Manager: Mr. Christopher Chamberlin Po i'cri' andt Ptublic PoliCv Table of Contents Preface ........................................................ I Acknowledgements ........................................................ III Executive Summary ......................... ............................... i Profile of Poverty in Thailand ................. ....................... ii Patterns of Inequality ................................................... vi Strategic Issues ........................................................ viii Public Programs and Poverty .................... ....................... xiii Implications for Policy . ................................................. xviii Chapter 1 Concepts, Measurement, and Extent of Poverty in Thailand What Is Poverty? ............. ........................... 1 Measurement of Poverty ............................ ............ I Extent of Poverty and Changes in Poverty in Thailand ....... ..... 3 Poverty and Unemployment ........................................ 5 International Comparisons ........................................ 7 Overlap between the Income - Poor and the Consumption - Poor. 8 Reliability of Survey - Based Estimates of Consumption and Income ........................................ 10 Policy and Research Issues ........................................ 11 Chapter 2 Who are the Poor of Thailand? Region of Residence .................................. 13 Rural - Urban Differences .................................. 15 A Provincial Poverty Map ............. ..................... 15 How Concentrated are the Poor Geographically? ............. ........ 16 Household Size and Composition .................................. 17 Age and Sex of the Household Head .................................. 18 Education of Household Head .................................. 19 Occupation of the Household Head .................................. 20 Ownership of Land .................................. 21 Policy and Research Issues .................................. 22 Chapter 3 Inequality in Thailand Overall Trends ............................................ 26 International Comparisons ............................................ 27 Regional Variation ............................................ 28 Patterns of Inequality ................................... ......... 29 Income Inequality by Sources of Income ............................... 30 Causes of Income Inequality in the Northeast and in Bangkok ....... 30 Changes in Inequality between 1998 and 1999 ......................... 32 Thailand Social AXlonitior IPoi'ertr' and Public Polici, Changes in the Distribution of Education ............................ 33 Research and Policy Issues ............................ 35 Chapter 4 Strategic Policy Issues in Poverty and Inequality Poverty and Self Reliance ..................... 36 Structural and Chronic Poverty ..................... 39 Poverty and Environmental Resource Constraints ................... . 41 Gender and Poverty .............................................. 43 Correlates and Causes of Poverty ...... . ............................... 46 Poverty in the Northeast .............................................. 49 Economic Growth, Inequality, and Poverty Reduction across Provinces .............................................. 50 Policy and Research Issues ............................................. 55 Chapter 5 Empowering the Poor Support from the Legal Environment .................. ................ 61 Institutional Environment .............................................. 62 Progress in implementing reforms mandated by the Constitution.. 62 Decentralization as a tool for the poor? ............... ................ 63 Empowering Communities .............................................. 65 Programs aimed at supporting community initiatives ............... 66 Institutional Support ............................................. . 67 Measuring Results and Other Challenges .............................. 68 Chapter 6 Protecting and Investing in the Poor Government Expenditure on Anti-Poverty Programs ................. 72 Programs that Protect the Poor ..................................... 75 Programs Investing in the Capacities of the Poor ...................... 82 Policy and Research Issues ................................ ..... 85 Thailoind Social, iionitor P(ovlrIw antdI Iuiblic PoliwV Annex A Government Expenditure on Anti-Poverty Programs (in millions of current bath), 1993 - 99 ................................. 88 Boxes 1 The Definition of Poverty ................................................ 1 2 Poverty is a Feeling ................................................ 2 3 The Thai Socio-Economic Surveys ..................................... 2 4 Dissemination of Information on Poverty .............................. 12 5 Village - Level Targeting and Village Databases ..................... 23 6 The Ultra Poor .................... ............................ 39 7 Environmental Capital ................................................ 41 8 The Nexus between the Environment and Poverty ........ ......... 42 9 "Causes" of Poverty ................................................ 46 10 Giving the Power to the People-The Thai Constitution ............... 61 11 The 9th National Economic and Social Development Plan and Poverty Alleviation ............... ...................... 63 12 Central Government Subsidies to Local Authorities .................. 65 13 The Remedy for Poverty ..................................... 66 14 Thailand Social Investment Fund: Security Through Empowerment ................................. 70 15 Impact of the Crisis: Vulnerability of the Poor ........................ 76 16 Disparity in Education Budget Allocations ............................. 82 Figures I Number of employed persons and unemployment rate, third quarter, 1989 - 2000 ........................................... 6 2 Unemployment Rate by Region, third quarter, 1996 - 2000 ......... 7 3 Headcount ratio of consumption - poverty, 1987 - 99 selected Asian countries (poverty line defined at 1993 PPP $1.50 per person per day). 7 4 Indices of mean monthly real income and consumption expenditure per capita, 1998 - 99 (1988 = 100). 8 5 Percentage of poor based on income and consumption expenditure, 1988 - 99. 9 6 Cumulative distribution of per capita income and expenditure, 1999. 9 7 Agreement between income and consumption - poverty measures, 1988 - 99 .10 8 Headcount ratio of income-poverty (%), by region, 1988, 1996 and 1999 .13 9 Headcount ratio of income-poverty, by region, 1988 - 99 (1988 poverty headcount = 100) .14 10 Headcount ratio of income - poverty (%), by rural/urban area, 1988, 1996 and 1999 .15 11 Headcount ratio of income - poverty, by rural/urban areas, 1988 - 99 (1988 poverty headcount = 100) .15 12 Incidence of income - poverty (%) by province, 1998 .16 1aI,landS,it .S.)citalll(M7ifor Po yer v an}l I clilic PFoliclV Figures 13 Contribution of the 17 poorest provinces to national poverty, 1998 ............................................... 16 14 Cumulative distribution of poverty across villages, 1998 ............ 17 15 Headcount ratio of income poverty, by household size, 1992-99 ... 17 16 Headcount ratio of income poverty, by dependency burden, 1992 - 99 .18 17 Headcount ratio of income poverty, by age and sex of household head, 1992 - 99 . 19 18 Headcount ratio of income-poverty, by household head's schooling, 1992 - 99 .19 19 Percent change in real income per capita, 1996 - 99, by household head's schooling .20 20 Headcount ratio of income-poverty, by household head's occupation, 1992 - 99 .............................................. 20 21 Composition of the poor by occupation, 1992 - 99 ........ ........ 21 22 Headcount ratio of income-poverty among farm households, by size of owned land, 1992 - 99 .21 23 Percent change in rice yields, by region and by per capita land quintiles (adjusted for land quality), 1995 - 96 to 1998 - 99 ....... 22 24 Income Inequality, 1990 - 99 ........................................... 26 25 Lorenz curves for Income, 1981 and 1999 ........... .............. 27 26 Gini Coefficient of consumption, 1987 - 99, selected Asian countries (%) ......... ....................... 27 27 Mean per capita income, by region, 1990 - 99 ........................ 28 28 Decomposition of overall income inequality into its various causes, Northeast and Bangkok, 1998 .30 29 Lorenz curves for per capita income, expenditure and owned land, rural areas only, 1998 .31 30 Mean household income per capita and share in total population, by major occupation, Northeastern region .32 31 Mean real household income per capita in 1998 and percent real change in per capita income, 1988 - 99, by schooling of household head.33 32 Mean real household income per capita in 1998 and percent real change in per capita income, 1998 - 99, by age of household head .33 33 Distribution of enrolled students at the primary and lower secondary level, by real per capita income quintile, 1992 - 99 . 34 34 Distribution of enrolled students, by level and by real per capita income quintile, 1992 - 99 .34 35 The volume of income transfers in relation to total income, by real per capita income quintile, 1969 - 99 .37 36 Incidence of income poverty in the absence of transfers, 1996 - 99 .37 37 Expenditure shares on selected items of expenditure by the poorest 20% of household, 1996 and 199 .38 Thailand,S cial M'-lfitOP IP017ertv anid I'tublic Policly Figures 38 Income-poverty incidence in selected provinces as a ratio of national poverty incidence, 1944 - 99 ....................... 40 39 Estimated effect of female-headedness on the probability of being poor, by age of female head ............. ........... 49 40 Growth rate in per capita GDP and Changes in incidence of consumption - poverty, 1988 - 99 .................................. 50 41 Shares of each region in total GDP and population increase taking place in Thailand between 1987 and 1996 ..................... 51 42 Changes in the income-poverty headcount ration and in the number of income-poor decomposed into changes due to growth and changes due to distributional shifts, 1992 - 94 to 1998 - 99 .53 43 Government expenditure on anti-poverty programs, 1993 - 99.... 73 44 The government expenditure and average household living standards across provinces, 2000 ...................... 74 45 Coverage and incidence of government health programs, by real per capita consumption quintiles, 1999 ........................ 76 46 Lorenz curves for beneficiaries of government health programs, 1999 ......... 77 47 Coverage and incidence of social security and social pension programs, by real per capita consumption quintiles, 1999 ............ 78 48 Incidence of income-poverty among individuals residing in households headed by a person aged 60 years or older, by household size, 1998 and 1999 ...................... 79 49 Lorenz curves for beneficiaries of the social security and social pension for the elderly poor programs, 1999 ................ 80 50 Coverage and incidence of public employment generation schemes, by real per capita consumption quintiles, 1999 ....... 81 51 Lorenz curves for beneficiaries of public employment schemes, 1999 ........... 82 52 Coverage and incidence of government educational assistance programs, by real per capita consumption quintiles, 1999 .......... 83 53 Coverage and incidence of government school nutrition programs, by real per capita consumption quintiles, 1999 ........... 84 54 Share of each real per capita income quintile in total household (gross) borrowing from the Bank of Agriculture and Agricultural Cooperatives, 1996 - 99 (agricultural households only) ................... 85 Thoiland i Social zVIonWi1 Poi,ert andl P.ublic P'oicwi' Tables 1 Measures of Poverty 1988 - 99 ..................... 4 2 Aggregate household consumption and income, by source, SES and national - Account estimates, 1998 (billions of current bath)... .11 3 Estimated maximum likelihood probit equations for the probability of being income-poor, by rural and urban areas, 1998.. 57 4 Estimated maximum likelihood probit equations for the probability of being income-poor, Rural Northeast and Rural Other Regions, 1998 .58 5 Cross-province regressions of incidence of income-poverty, 1994-99 .............................................. 59 References ................................................................................ 89 *******n***********o***** Thaila77d Social/ Mvonitor Pow erii and Putblic Policv Preface Poverty has been studied extensively in Thailand. It is not a new problem, but it is re- emerging in prominence and therefore the subject of both public and private concern. Civil society groups have been working hard to put the plight of the poor at the forefront of the national agenda. The Government has also taken steps to raise the profile of the poverty issue. Tackling poverty and promoting pro-poor growth is a high priority in the Ninth National Economic and Social Development Plan (2002-2006). The objectives of this issue of the Thailand Social Monitor are modest: to provide fresh insights into the poverty dilemma; to strengthen the case for an active poverty reduction strategy; to suggest some issues for further research. Poverty and Public Policy cannot aspire to be a comprehensive policy review, nor does it propose a detailed strategy on how to tackle the poverty problem. This issue of the Thailand Social Monitor, therefore, is written for Thai policy makers, to provide them with the best evidence currently available on poverty and public policy, and to strengthen the foundation for anti poverty strategies in Thailand. The coverage of this report is thus broad, ranging from detailed analysis of poverty dimensions, a review of strategic issues and finally, an assessment of the performance of some key policies and programs. Poverty and Public Policy offers us a deeper analysis of poverty and in particular: the profile of the poor and the causes of poverty; on its relationship with distribution and growth; and on the persistent challenges of the Northeast. The process of preparing this Social Monitor has been one based on partnership from its very inception. Poverty and Public Policy is the product of a fruitful collaboration between the World Bank, the National Economic and Social Development Board (NESDB), the Thailand Development Research Institute (TDRI), Thai academic and social experts, and international specialists. We particularly wish to thank the management and staff of the NESDB for their indispensable contributions and support to this report. What next? Fighting poverty is a high priority for the Royal Thai Government. To this end a Country-Development Partnership on Poverty (CDP-P) is currently under preparation between the NESDB and the World Bank. The CDP-P will be aimed at supporting the Government's efforts to formulate and implement effective poverty reduction policies. Another key activity will be the forthcoming collaboration between NESDB, the National Statistical Office (NSO) and the World Bank in developing a Poverty Map for Thailand. The purpose of this activity will be to build government capacity to analyze the incidence of poverty at the district and sub-district levels by combining household survey and census data to estimate consumption- or income-based welfare indicators. Such a map can become a key instrument for improving the targeting of poverty programs. Thailand Social AJ oito I Po ,ertv and l'ublic Policv At the end of November 2001, TDRI will host a Conference that will bring together government, academia, civil society and the donor community to exchange views in this important area of poverty reduction. This event will offer an important opportunity for Thais from all walks of life to express their views and to build consensus on the way forward. We would like to express our thanks to the many experts from Government. development agencies, and civil society who provided generously of their time and insights during the preparation of Poverty and Public Policy. Ian C. Porter Country Director World Bank Office Bangkok Thaiiand Social Alfonitor 11 I' merl'7 andl l'tblic Policl Acknowledgements This report has been prepared by a core team of principal authors led by Mr. Christopher Chamberlin (Task Team Leader, EASHD) Mr. Anil Deolalikar (lead consultant), and Ms. Maryam Salim (EASHD). Overall guidance for the report was provided by Mr. Homi Kharas (Chief Economist, East Asia and Pacific Region). Key contributions and policy guidance were provided by the National Economic and Social Development Board (NESDB) and the Thailand Development Research Institute (TDRI). The report was discussed with counterparts and civil society on several occasions, including full review workshops held in March and October 2001. Analytical inputs were provided by Ms. Benu Bidani (EASPR), Ms. Khuankaew Varakornkarn (EACTF), Mr. Avinash Kaza (intern, EACTF); Ms. Priyanut Piboolsravut, Ms. Waranya Teokul, and Ms. Lalita Chanwongpaisarn (National Economic and Social Development Board); Mr. Somchai Jitsuchon (Thailand Development Research Institute); Mr. Harold Coloumbe (consultant); Mr. Nanak Kakwani (consultant); Ms. Sauwalak Kittiprapas (consultant); Mr. Isra Santisart (consultant) and Mr. Peter Warr, (consultant). Valuable comments and suggestions on earlier drafts of this report were provided by Mr. Ian C. Porter (Country Director, Thailand); Ms. Tamar Manuelyn Atinc, Mr. Ejaz S. Ghani, Mr. Ijaz Nabi, Mr. Kaspar Richter (EASPR); Mr. Patchamuthu Illangovan (EASES); Mr. Samuel S. Lieberman (EASHD); Ms. Pamornrat Tansanguangwong (EACTF); Mr. J. Shivakumar (consultant, EACSQ); Mr. Promboon Panichapakdi (Care International); Ms. Amara Pongsapich (Chulalongkorn University); Mr. Khantong Dalad (Duang Prateep Foundation); Ms. Elizabeth Morris (ILO); Ms. Juree Vichit-vadakam (National Institute of Development Administration); Ms. Jirawan Boonperm (National Statistical Office); Mr. Witit Rachtatanun, Ms. Somsri Luangmanirut, Ms. Suwanee Kumman (National Economic and Social Development Board); Mr. Chalongphob Sussangkarn, Mr. Ammar Siamwalla, Mr. Worawan Chandeowit (TDRI); Mr. Mehdi Krongkaew (Thammasat University); Ms. Netnarumon Sirimonthon (UNDP); and Mr. Gamini Abeysekera (UNICEF). Peer reviewers for the report were: Mr. Jefffrey S. Hammer, Mr. Peter F. Lanjouw and Ms. Dominique Van De Walle (DECRG). Support from the Asia-Europe Meeting Trust Fund is gratefully acknowledged. Document processing was undertaken by Ms. Tasanee Chokwatana (EACTF). Thaliland Social fAT nitor III I Poi ert! and PtJblic l'olicl Executive Summary I. This is the sixth issue of the Thailand Social Monitor. In the post crisis environ- ment, the problem of poverty has taken on new characteristics and renewed importance, and the recently elected Government has identified the plight of the rural poor as a high social priority. This issue of the Social Monitor, therefore, is written for Thai policy makers, to provide them with the best evidence currently available on poverty and public policy, and to strengthen the foundation for anti poverty strategies in Thailand. 2. This report approaches poverty in Thailand from four perspectives: * the changing profile of the poor, who they are, where they live, their defining characteristics, so as to better understand the dimensions of the problem (Chapters l and 2); * the changing profile of income inequality in Thailand, to assess whether income distribution should be an issue for public policy (Chapters 3 and 4); * some of the strategic, cross-sectoral issues that are at the center of public policy debates on poverty reduction in Thailand (Chapter 4); * the performance of recent policies and programs to reduce poverty, so as to ap- preciate the strengths and limitations of public policy in this challenging domain (Chapters 5 and 6). 3. The coverage of this report is thus broad, ranging from detailed analysis of pov- erty dimensions, strategic issues and, finally, policies and programs. However, it is im- portant to note the report's limitations, particularly on the policy and program side. While chapters 5 and 6 analyze targeted poverty interventions, they do not capture the full range of public efforts to reduce poverty, nor do they address the anti-poverty bene- fits of universal programs, such as education, health, transport or agricultural services. In addition, macroeconomic policies, which can exert a large influence on poverty via such instruments as tax policy and trade policy, are not covered. These and other issues leave much to be done in the analysis of poverty. 4. Poverty has been studied and policies put in place to deal with it over many years in Thailand. This analysis of poverty began with a review of the large inventory of exist- ing work, mostly by Thai scholars, and then has explored the vast household data sets available in Thailand, and assembled a team of experts and advisers to pull from the data fresh insights into the poverty problem. Poverty and Public Policy is thus the product of a fruitful collaboration between the World Bank, the NESDB, TDRI, Thai academic and social experts, and international specialists. With such inputs, it might be expected that this report would go beyond analysis and into recommendations on strategy and a list of policy proscriptions. 5. The approach taken in Poverty and Public Policy is to present evidence, link it to public policy options, and indicate where there are gaps in information and analysis. It does not select a strategy nor does it rank policies and programs that Thailand should adopt. That is a task for Thai institutions and leaders to undertake. Indeed, the 9th Eco- Thailand Sociail AMlonilor i Po tertv antld 'thlic Polic1 nomic and Social Development Plan of the NESDB has been directed to the poverty~ problem, and the TDRI, among other Thai institutions, is undertaking extensive work oll poverty policy. Hopefully their efforts to deepen and extend the anti poverty strategy for Thailand will find some useful information from this issue of the Thailand Social Moni- tor. 6. Poverty and Public Policy argues that the poverty problem in Thailand is re- emerging as one of the nation's most serious problems. Until the onset of the crisis in 1997, high economic growth rates pulled poverty down from 32.6% in 1988 to merelv 11.6% in 1996. During this period, average incomes were growing rapidly; migration from the poor areas of the Northeast to Bangkok and the Central region helped keep pov- erty rates in the Northeast below what they might have been; dynamic construction growth fueled demand for low and semi-skilled workers; and school enrollments in- creased impressively, providing the poor with access to primary and lower secondary schooling. The reduction of poverty was underway and at a fast pace. 7. But much of this came to a halt with the economic crisis in 1997. During the next two years, poverty incidence increased sharply. The weight of evidence also suggests that the poor endured the brunt of the crisis, as their wages, profits, and employment fel L more than that of better-off Thai households. While it is possible that the poor will regain quickly what they have lost once growth resumes, the current outlook for economic growth in Thailand is guarded, given global uncertainties. Faced with the dual challenge of restoring economic growth and better serving the needs of the poor, the Government is grappling with fundamental choices on the allocation of public resources to competing programs and to competing segments of Thai society, including the poor. This report is written to strengthen the case for pro-poor public policy. Profile of Poverty in Thailand 8. Poverty and Public Policy sets out in Chapters 1 and 2 the alternative measures ol poverty using two different sets of household data, consumption (also termed "expendi- ture" data) and income. The various measures of poverty and data sources can produce quite different results. Thailand's official poverty indicators are currently based on the income data set and employ a special procedure to calculate a minimum income for each household participating in the survey. Both approaches are distinctive and make the Thai data difficult to compare with other countries. Poverty and Public Policy utilizes these conventions, but also points out some of the difficulties. Thai/and Social Aonitor ii IPoveri) anitl Ptublic Policv 9. The most common meas- Headcount ratio of income-poverty (%), ure of poverty is the head-count 50 48 by region, 1988, 1996 and 1999 ratio, which is the proportion of 45 the population with incomes be- 01988 *1996 01999 low an established poverty line. The official poverty line for Thai- ° 31 land was established by the E 3 27 NESDB in 1998.1 The head-count t 25 ratio of poverty, based on this 2 20 poverty line, fell continuously s 15 from 1988 to 1996, but then re- 0 * versed itself and increased in 1998 5 6 and 1999. All other indicators of 0 _ poverty, such as the poverty-gap Northeast South North Central Bangkok ratio and the severity of poverty index, also show an increase in the Figure 1 This Figure is a replica of Figure 8 in Chapter 2 two years after the onset of the economic crisis.2 10. Another striking feature of Headcount ratio of income-poverty, by region, 19W8-99 poverty in Thailand is the large dis- (198 poverty headcomt =100) parity between regions, with the Northeast having the highest inci- 90- -- N hea -90 dence of poverty and Bangkok hav- go Soh 80 ing virtually no poverty (Figure 1). ^ -'- \No(k - 70 The disparity has widened over the 1i -*- Cvtral 60- 60 years, with poverty declining at a _K/ faster rate in the better-off regions 2 50- 50 than in the poorer regions (Figure 4 \40 2). The economic crisis further ex- -\ acerbated the regional disparities in = 30 poverty, as the incidence of poverty 20 20 increased sharply in the Northeast io 10 between 1996 and 1999, somewhat 0 ___ in the South and Central regions, 1992 1994 19% 1998 1999 and actually declined in Bangkok Figure 2 This Figure is a replica of Figure 9 in Chapter 2 'The national average of the official poverty line was Baht 878 per person per month in 1998 and Baht 886 per person per month in 1999. This means that the poverty line (converted to a daily basis) was signifi- cantly lower than the minimum wage, constituting less than one-fourth of the minimum wage in 1999. In current dollar terms, the official Thai poverty line in 1999 was equal to approximately US$0.75 per day. 2Income- and consumption-poverty show different trends during the immediate post-crisis period, with consumption-poverty showing a much greater increase than income-poverty from 1996 to 1998. This is likely to be due to the fact that income data in the SES are collected for a 12-month reference period pre- ceding the survey, which is itself undertaken over the entire year. As such, income data for 1998 for nearly one-half of the SES sample capture pre-crisis (pre-July 1997) income, which might explain why income- poverty from the SES shows a relatively modest increase in 1998 (from 1996 levels) and a large increase in 1999. On the other hand, consumption data are collected for a reference week, which is probably why con- sumption-based poverty shows a sharp increase from 8.1% in 1996 to 14.4% in 1998 (and flatness from 1998 to 1999). The trend in consumption-based poverty is consistent with movements in GDP per capita. Th/iland S.Socil/ AIonito- iii l'o feJitv anil 'ut!lic Policw; and the North. 11. The provincial differences in poverty are even greater than the regional differ- ences. These are highlighted in Figure 3, which shows a 'poverty map' of the country in 1998. While the highest rates of poverty are mostly found among the Northeastern prov.- inces, there are pockets of high poverty in the Northern and the Southern regions as well (e.g., provinces of Mae Hong Son, Narathiwat and Yala). 12. Since many of the poorest provinces in the Northeast are also the most populated provinces in the country, the share of all of the Thai poor who live in these provinces is also very large. The SES data show that the 17 poorest (out of a total of 76) provinces in Thailand accounted for nearly two-thirds of all the poor in Thailand in 1998. Indeed, the four poorest provinces - Nak- hon Ratchasima, Surin, Sisaket and Roi Et - themselves account for a quarter of all the poor in the country. The fact that poverty is so highly concentrated in a few provinces suggests the ex- treme importance - and relative ease - of provin- cial targeting of poverty interventions.3 f - 5 ^ Lq 1l55-13 13. In principle, targeting poverty interven- 13 - 21 tions to a smaller geographical unit, such as a vil- 21 - 31 lage, could be even more effective. The SES data 31 - 46 suggest that poverty is concentrated in certain vil- lages as well. A mere 10% of the poorest villages in the country account for nearly a third of all the poor, while slightly more than a quarterlof the poor,whiestlillag aouetant f Figure 3: This figure is a replica of Figure 12 in chapter 2 quarter of the poorest villages account for all of the Thai poor (Figure 4). 14. The Government is in the process of implementing its most crucial rural policy initiative, the Village Fund Scheme. The concentration of poverty in a relatively small proportion of villages points to the need for techniques to identify such villages for tar- geting purposes. The analysis in Figure 4 refers to sampled villages, but does not provide a complete list. Such statistical techniques are available and are being explored by the NESDB. 30f course, targeting of poverty interventions is never easy. What is meant here is that geographical targe:.- ing is administratively more feasible when the poor are concentrated in a few provinces than if the pocr were dispersed over a large number of provinces. 4Since the size of the SES samples is not large enough for the SES data to be representative at the village level, the findings in Figure 4 should be treated as illustrative. Th(il1n7d ,S cial Al lnitor iv Po 1lywrv ah d Puiblic Polwilv 15. There are many other Cumulative distribution of poverty across villages, 1998 characteristics that are corre- c00 lated with poverty in Thai- 90 land, such as occupation, 80 size of household, ru- - 70 ral/urban location, and oth- ° 60 ers, but at the top of the list O 50 is education. Individuals 40 residing in households E headed by persons with no u or primary education are at / significantly greater risk of / poverty than those in house- 0 lo 20 30 40 50 60 70 80 90 100 holds headed by a secon- Cumulative % of villages (ranked by poverty incidence) dary- or post secondary- educated person. Not only are Figure 4 This Figure is a replica of Figure 14 in Chapter 2 poverty rates higher among the less-educated, they experienced a larger increase in poverty during the crisis. Be- tween 1996 and 1999, for instance, the headcount ratio of income-poverty increased from 21% to 24% for households headed by an illiterate person and from 12% to 19% among households headed by a primary-educated person. In contrast, poverty incidence did not change appreciably among households headed by persons with vocational and post- secondary education. 16. Ownership of land is typically correlated inversely with the poverty rate, but in Thailand poverty among small farmers owning less than 5 rai of land was increasing even before the economic crisis, with the result that a larger proportion of small landholders were poor in 1999 than in 1992. While medium-sized farmers (those owning 5-19 rais of land) fared somewhat better, the incidence of poverty among them was not much changed between 1992 and 1999, although nationally poverty declined from 23.2 to 15.9%. 17. What these results demonstrate is that small and medium landholders have been more-or-less excluded from the general economic growth that Thailand experienced dur- ing the 1990s. One reason for this increase in poverty among small and medium farmers may be that these farmers have experienced stagnation or declines in agricultural produc- tivity over time (MERI and World Bank, 2000). This sub-group of rural Thai households cultivating small plots of land could be an important target group for poverty reduction, but the reasons for their declining yields are not clear from the available data. The avail- able evidence does not measure natural resource degradation, rainfall and water access, or access to agricultural services and marketing infrastructure, nor the key factors of labor and capital inputs into these farms, each of which could play a role in explaining their low and declining productivity. Thail/and Social Aonitor v Pover/Y' adM1 Public POUliCY' Patterns of Inequality 18. These summary findings on poverty are amplified by the patterns of inequality in Thailand, the subject of Chapter 3. Inequality measures are of interest because Thailand has long shown a pattern of high income and consumption inequality relative to other countries in the region. Income inequality increased sharply from 1981 to 1992, began trending down after that, only to reverse itself sharply in 1999. It is unclear whether the increase in inequality from 1998 to 1999 was a transitory event caused by the economic crisis or whether the country is once again entering a period of rising income inequality. 19. An analysis of the sources of inter-household income inequality in 1998 suggests that education has the largest explanatory power in accounting for inter-household varia- tions in per capita income. The explanatory power of education is greater in the North- east than in Bangkok, reflecting the fact that education is significantly more widespread in Bangkok than in the Northeast. The next most important factor explaining income inequality is the demographic characteristic of families. Differences in family size, age and sex composition of the household, as well as the age and sex of the household heacl explain approximately 10-13% of overall income inequality. There is an almost negligi.- ble contribution of land ownership to overall income inequality in the Northeast. Land is not distributed equally in the Northeast, but this only affects farm households, leaving out 5 others among whom income inequality is even more severe. 20. To better under- stand income inequality in Mean real household income per capita in 1998 and percent real change in per capita income, 1998-99, by schooling of household head Thailand, a good place to 10,000T 17.5 20 begin is the sharp in- 900 Mean0rel M inome percapta tO is crease in income inequal- =,00 T change, 199-99 . 0 7,000 ity between 1998 and - , \ 5 1999. This was a direct 5000. . .30 result of the economic cri- 4,000 -4.0 sis, which had a dispropor- 5 3,000 15.9 ~~~~~~~~~~~~~~~~~-10 tionately negative impact 2,000 --1-O on the incomes and liveli- 1,000 X-5 hoods of the poorer sec- 0 l l _ -20 tions of Thai society. This secendary secondary and technical is seen clearly in Figure 5, Completed schooling ofhusehold head which shows that the poorest households in Figure 5 This Figure is a replica of Figure 31 in Chapter 3 1998 (i.e., those headed by a person with no schooling or primary schooling) experienced the sharpest drops in real 5The results reflect the fact that, even in the Northeast, farming is not the only occupation, and land is not the only source of income. Indeed, only one-third of individuals in the Northeast belong to households in which the main occupation of the head is farming (including farm work). Furthermore, farm operators have on average the lowest incomes of all occupational groups in the Northeast. Thus, while land owner- ship may be an important source of inequality of incomes among farm households, it does not explain a great deal of overall income inequality, as some of the richest individuals in the Northeast own no land at all. Of course, land ownership is still a very important determinant of poverty. Thailand Social A-Janitor vi Pot erl andl P'ublic Policy income between 1998 and 1999, while those that were relatively better-off (i.e., those headed by post-secondary educated persons) actually experienced an increase in real in- come between the two years. 21. Given that education Distribution of enrolled students at the primary and lower secondary has the largest explanatory level, by real per capita income quintile, 1992-99 power in explaining income DR,chest 90 I 13 3 inequality and given its I U powerful role in reducing 7Foth 0% - poverty, an important ques- 2 60% \ tion is whether the distribu- 50% - tion of education in the Thai ummld 40%/. n 23 23 population has been improv- 30% _ ing or worsening over time. 20% 26 27 27 f 20 111~d 10%19 2 Data from the various So- O% __ _ I _ ;I cioeconomic Surveys show 1992 1996 1 19 92 1916 that that there has been a Poorestmary Losecondwy remarkable expansion of education in Thailand, and that the poorest quintile has Figure 6 This Figure is a replica of Figure 33 in Chapter 3 increased its share of lower secondary students impressively during the decade of the 1990s (Figure 6). While only 12% of lower secondary students were drawn from the poorest quintile in 1992, as many as 22% were in 1999. Chapter 3 also shows that the poorest quintile has increased its share of upper secondary students in Thailand - from about 10% in 1992 to 15% in 1999. The share of the poorest quintile among vocational students has increased even more - from a mere 2% in 1992 to 8.4% in 1999. However, the share of the poorest quintile in upper secondary and vocational education remains below their population share. In addi- tion, the percentage of university students drawn from the poorest quintile is negligible - a mere 0.9% in 1999. 22. Of course, an important reason for the low representation of the poorest quintile in university education is that the entry of this group into lower and upper secondary schools is just too recent for it to have a cohort of secondary-completed students that are eligible for university admission. As more and more students from the poorest quintile enter and graduate from secondary schools, one would expect the pool of poorest students in university education to increase. However, this is by no means an automatic process. The cost of university education in Thailand, as in other countries, is large, and this re- stricts the access of poor students, howsoever eligible they might be, to university educa- tion. There is thus a role for public policy to proactively target educational assistance programs, such as student loan and scholarship schemes, to students from the poorest backgrounds. 23. If the recent progress in enrollment rates of the poor is sustained and expanded to higher education, it is reasonable to expect that the stubbornly high rates of inequality in Thailand might steadily improve over time. This will have cross benefits to the reduc- 777(tibSada ocial Mfollitol vii Poi,erly' andi Public Policv tion of absolute poverty as well. As in most developing countries, education is the key to economic advance for poor individuals and their families. Strategic Issues 24. Chapter 4 of this report turns to the strategic issues confronting Thai policy mak- ers as they build the policy foundations for a resumption of growth and the reduction of poverty. Traditionally in Thailand, anti poverty programs were associated with transfers to the indigent, the elderly, and disabled. Rapid growth and policies promoting growth were seen as more than adequate to deliver substantial income gains for all Thais, includ- ing the poor. In recent years, these views have undergone some refinement and devel- opment, as Thai debates on public policy have intensified: * Growth rates that were once the highest in the world are now expected to moder- ate over the medium term, thus focusing attention on public policies in addressing more directly the problem of poverty; * The Northeast of Thailand has become the regional focal point of poverty con- cerns, as it has continued to lag behind the rest of the country and suffered most during the crisis; * The crisis impacts demonstrated that private, informal safety nets were effective, but not adequate to cushion the effects of the economic contraction, particularly on the poor; i Highly unequal income distribution, long masked by the benefits of rapid growth, has emerged as a policy issue; i Poverty among certain sub-groups and in certain areas appears to be chronic and resistant to the benefits of growth, posing a possible "structural" dimension to poverty. 25. The strategic issues taken up in Chapter 4 are cross-sectoral and thematic: self reliance and informal safety nets; structural poverty; causes of poverty and the case of the Northeast, natural resource degradation and poverty; gender and poverty; and the role of growth vs. income distribution in provincial and national poverty outcomes. The list is far from complete. Sectoral issues are addressed in the program analyses of Chapters 5 and 6, but some strategic perspectives are not covered in the report, such as the future of natural resource pricing for the agricultural and industrial sectors and its effects on the poor. Credit policies affecting various productive sectors are undergoing significant pro- poor modifications under the Government, but are covered only partially in this report. With these other omissions noted, the following sections summarize the main strategic findings of Chapter 4. 26. Poverty and Self Reliance. There is nothing more distinctive in the Thai social context than the value and emphasis on family self reliance and mutual community-based support. Thai families, especially in the lower-income groups, took concrete steps to cushion the effects of the crisis and to protect their social assets, even as their incomes contracted more deeply than those of better-off families. This pattern of self-reliance and mutual assistance can be seen in the evidence on income transfers and consumption shifts ThailandS c iCal Alh)/7110 viii J'o w'Lr?i} and Puhlic Policv at the household level. As Thai policy makers address demands for more official safety net programs, an important consideration is the admirable and socially beneficial role of such voluntary family-coping strategies, and the importance of sustaining them. 27. One way in which the poor can cope with adverse ciorcumsancpes wisthadvero Tbe volume of income transfers in relation to total income, circumstanlces IS through by real per capita income quintile, 1996-99 greater reliance on income 12 117 transfers from friends, rela- , tives and the government. In 9.8 1996 .1998 01999 the case of Thailand, most of 8'9 91 the transfers are from relatives, 884 8 3 typically those members of the g 7 7.6 7.7 family who have migrated to 7 the urban areas (typically, 6 Bangkok) in search of better- 5251) paying jobs. However, the L 4T6 economic crisis of 1997 was Poorest Second Third Fourth Richest unusual in that it first affected peal per capia incone quintile Bangkok, and this resulted in a large number of migrant Figure 7 This Figure is a replica of Figure 35 in Chapter 4 workers in the construction sec- tor in Bangkok being laid off. As a result, the ability of these workers to send remit- tances to their families in the rural areas, especially the Northeast, was curtailed. Despite the income losses imposed by the crisis, transfers sustained their strong role in propping up the incomes of the less well off. As seen in Figure 7, transfers are larger in relation to total income for the poorest three quintiles relative to the richest two quintiles, even more remarkably, the poorest three quintiles increased their reliance on transfers between 1996 and 1999. Without those transfers to the lower quintiles, poverty would have risen by over 6 percentage points. 28. Strategically, this and other patterns of self reliance and community based support mechanisms (World Bank, 2000d) are the foundation of social protection in Thailand. Efforts to expand official safety nets in Thailand have in some cases utilized community based institutions to manage and allocate resources to beneficiaries, thus strengthening these social assets, rather than substituting for them (see chapter 5). These findings also suggest the importance of contributory insurance mechanisms as consistent with princi- ples of self reliance. 29. Structural poverty. Structural poverty refers to pockets of poverty that are persis- tent over time and not readily reduced with economic growth. Structural poverty thus implies that some poor families continue to remain poor for reasons that are not easily understood, while others in 'transitory poverty' are able to climb out of poverty. Has Thailand reached a stage, at poverty well below 20%, where poverty has become easy to find but "hard to reach"? Thailand,S.ocial 1fonito ix Poivrtv' andl Ptublic IPolicv 30. First, as noted in Chapter 2, certain groups, such as farm workers and farm opera- tors (in particular, small and medium landholders), large households, households with a large number of dependents relative to earners, and households headed by individuals with primary or less education, have had stubbornly high rates of poverty over a long pe- riod. Indeed, poverty for some groups, such as small landholders, has increased even in absolute terms during the decade of the 1 990s. All of this evidence suggests that a sig- nificant portion of the poverty among these groups is likely to be structural. 31. Similarly, the ranking of regions by poverty incidence has remained remarkably stable over time. The Northeast was the poorest region in 1988, and it continues to be the poorest region today. Of course, poverty levels have fallen in absolute terms in the Northeast, but they have fallen far more slowly than in other regions. This suggests a structural element to poverty in the Northeast. 32. Another indication of structural poverty is seen in the provincial data on poverty incidence. A ranking of provinces by poverty incidence in each of the four years - 1994, 1996, 1998 and 1999 - shows that, of the poorest 17 provinces in Thailand in 1994, as many as 8 (Mae Hong Son, Narathiwat, Kalasin, Sakhon Nakhon, Yasothon, Nongkhai, Nakhon Phanom and Sisaket) remained in the poorest- 17 group in every one of the four years. 33. Further telling evidence of structuralism would be that the poorest provinces are falling further behind the national progress in poverty reduction. Chapter 4 presents evi- dence for four such provinces from 1994 to 1999. Notably all became relatively more poor than the national average from 1994 to 1999, and also between 1994 and 1996 - years that predated the crisis. 34. The difficulty with demonstrating structural constraints on poverty reduction is that the analysis only identifies likely symptoms of structuralism, not all its causes. The data do not allow the report to address soil and rainfall constraints, cultural or ethnic di- mensions, or systematic patterns of exclusion. But, for some provinces, a structural di- mension seems to be in evidence, and suggests that growth alone will be insufficient to narrow the gap between these provinces and the better-off areas of the country. 35. Causes of Poverty. Questions on the structural aspects of poverty turn back to the underlying causes of poverty, and in particular if the determinants of poverty (using sta- tistical techniques) are different for the consistently poorest region, the Northeast, com- pared to other rural areas of the country. 36. The results suggest that the determinants of poverty in the rural Northeast differ from those in the rest of the rural areas in the country in four ways. First, the amount of land owned has a much stronger effect on reducing poverty in the rural Northeast than in other rural areas. Second, while being a tenant significantly increases the probability of poverty in the other rural areas of the country, it has no such effect in the Northeast, per- haps because tenancy is not as widespread in the Northeast as in the other parts of the country. Third, somewhat surprisingly, schooling (with the sole exception of tertiary or Thailand Social Wfon ilor x Po 'ertiv anld Public Policy, university education) generally has a much smaller effect on reducing poverty in the rural Northeast than in other rural areas of the country. This surprising result may most likely reflect the fact that the main value of education in the Northeast lies in moving out of the region to other regions of the country where higher-wage employment opportunities can be found. 37. Fourth, while residence in a household headed by a female at any age reduces the risk of poverty in the rural areas of the rest of the country, the situation is very different in the rural Northeast. There, the age of the female head makes a big difference to the risk of poverty, with households headed by younger women (those aged less than 45 years) having a lower risk of poverty than male-headed households but households headed by older women having a substantially higher risk than their male-headed coun- terparts. These findings could be related to migratory patterns of males out of the North- east. 38. These results hold some interesting insights into potential targeting strategies in the Northeast: anti-poverty programs in the rural Northeast, as opposed to those nation- ally, would need to target small and marginal farmers (not tenants) and households headed by older women. These results also indicate that the Northeast has distinctive characteristics and that public policies devised nationally may need to be altered when applied to this region, which accounts for nearly half of the country's poor population. 39. Growth, distribution, andpoverty. At the center of many debates on poverty sits the question of the role of income growth vs. its distribution in a country's poverty situa- tion. Chapter 4 examines the role of income distribution changes and their importance over time at the national and provincial level. 40. The empirical results point to one reason why poverty reduction has been sluggish in some of the poorer provinces in Thailand. The results indicate that increased income inequality is posi- Shares of each region in total GDP and population increase taking tively and strongly place in Thailand between 1987 and 1996 associated with in- creases in poverty, _ * South even after control- 90% c Northeast ling for the impact of 80% economic growth. A 70%- North one-point increase in 60% l _ Central the Gini index of in- 50% [ I Bangkok-and come inequality is 40%- Vicinity associated with a 0.8 30% - percentage point in- 20% 52 crease in poverty in- 10% cidence. Thus, wors- 0% 1 l ening income ine- % share in GDP increase % share in population increase quality can substan- tially offset the bene- Figure 8 This Figure is a replica of Figure 41 in Chapter 4. Thadilald Social "I)U alnt' Xi Po) iertv and Public Policv ficial effect of economic growth on poverty reduction. In addition, the empirical results demonstrate that initial levels of high income inequality in a province are associated with reduced growth performance of that province in subsequent years, and this has an addi* tional dampening effect on poverty reduction. 41. This is also analyzed nationally for Thailand. Just as income growth slowed down dramatically in the aftermath of the crisis, income inequality began increasing. This ac- centuated the increase in poverty. For instance, between 1998 and 1999, poverty inci- dence increased by 3 percentage points. Had the distribution of income remained neutral between 1998 and 1999, the incidence of poverty would have fallen by a modest 0.5 per. centage points - not increased by 3 percentage points, as it actually did. In terms of abso - lute numbers, the worsening inequality resulted in an additional 2.1 million persons be- comingpoor between 1998 and 1999. 42. This is further demonstrated by Figure 8 which shows that the Northeast, which has seen its population grow by 32% since 1987 has only captured 11% of the increase in GDP over this period. 43. What this suggests is that covering income inequality can play a critical role in poverty reduction, especially in a low-growth environment. Given that prospects for fu- ture growth are guarded in Thailand, it may be particularly important for poverty- reduction policies to focus on reducing income inequality - or at least prevent further de- terioration in inequality - in the country. 44. Gender and Poverty. Chapter 4 summarizes the available information from the report and other sources on the significance of gender in understanding and addressing poverty in Thailand. Over the last three decades, Thailand, has achieved remarkable progress in its social indicators. The gender gaps have narrowed, especially in health and education. Enrollment of women has increased at all levels, and more women than men now are enrolled in higher education. Female workers seem to have fared better than males during the crisis, and female labor force participation is high. 45. But in other areas, there are clear disparities that may trap women in poverty More women than men are employed at below-minimum wages; average wages are lower for women than for men; older female-headed households are at a significant greater risk of poverty, especially in the Northeast; women are a small minority of elected office holders; and poor women are still tuming to commercial sex. 46. Thus, as in other areas of social development, the situation in Thailand yields mixed results. Thailand has done a remarkable job in increasing access to education and health services to women, but more needs to be done to increase the voice of women anj to reduce their sense of vulnerability and insecurity. The importance of several gender issues in the fight against poverty needs to be better appreciated by policy makers. 47. Environment. The linkages between poverty and the environment are complex and not easily defined. Access to natural resources - i.e. water resources, land and soiL, Thailand Social .toniltoi xii 1ivrl) Vtl' nd1 Putblic P(olicl the forest and fisheries - is critical to the everyday functioning of rural households. For some poor households, limited or low quality natural resources endowments trap them in low productivity livelihoods. For others, their poverty compels them to over-exploit the natural resources they have, causing a steady erosion in their natural capital base and in their incomes from it. And in other instances, the poor are helpless bystanders as other more powerful interests expropriate their natural resources, leaving them with degraded and less productive forests, fisheries and land. 48. In Thailand, rapid development over the last 30 years has been accompanied by significant pollution and degradation of natural resources in rural areas. Domestic sew- age, industrial effluents, and agricultural run-off have contributed to increasing pollution of coastal, surface, and ground water. Forest cover has decreased drastically from 53 percent in 1961 to 28 percent in 1989, when a logging ban was enacted, to 25 percent in 1998. Deforestation is particularly serious in the Northeast, where forest cover has de- creased by nearly 60 percent between 1985 and 1995. 49. There is an increasing awareness and demand for environmental protection across a broad section of society (see Box 8 in Chapter 4). Civil society representatives have underscored the need to address environmental problems, given the clear links with pov- erty. Consensus is emerging among the Government, private sector, and civil society on the need for increased attention to preserving the environment through better manage- ment of natural resources, broader public participation, and effective enforcement of regulations for Thailand. Indeed, the Ninth National Economic and Social Development Plan (9th Plan), for 2002-2006 explicitly emphasizes that sound natural resources conser- vation practices are important for building a strong social foundation as well as sustain- able poverty reduction. 50. This "nexus" of poverty and natural resource degradation is an important area for further analytical work and policy development, particularly in the Northeast, where natural resource quality and access are vital assets of the poor and over which there has been episodes of conflict. Public Programs and Poverty 51. Governments can combat poverty with a wide range of interventions, some di- rectly beneficial to the poor and narrowly targeted, while others more indirect. Typically, interventions are grouped into one of three categories: opportunity (actions that improve the capacities of the poor to take advantage of economic opportunities, such as access to education, land reform, or tax relief); security (actions that help families prevent or cope with sudden loss of income or assets, as in the onset of costly health care, unemployment, or old age); and empowerment (actions that increase the power of the poor to participate in public decision making, such as building social capital, decentralizing government, or reducing corruption of public officials). 52. This issue of Thailand Social Monitor presents available evidence on several more important anti-poverty programs and policies in Thailand. Using data from a spe- Thailaed Sociatl MAlni/or xiii I'miertiv and PIu.blic PolicY cial module of the Socioeconomic Survey of 1999, the analysis attempts to determine the targeting and coverage of each poverty program. Since only a few programs were in- cluded in the special survey, the scope of the analysis is obviously limited. 53. How large is the Total government expenditure and average household Thai government's poverty living standards across provinces, 2000 effort? This can be gauged I0.0 by the volume of resources e 98] spent on all anti-poverty *. 9,6 programs. In 1999, total . ** 9 94 expenditure on all anti- .9 poverty programs was ap- 92* proximately Baht 35 bil- 90 lion, which constituted c 8 8 * * * 4.2% of total government I 6- expenditure and 0.74% of 9 86 GDP. Aggregate govern- 9 8 10.0 10.2 104 10.6 10.8 11.0 11.2 11 4 11.6 ment spending on poverty Log real household expenditure per capita (Baht) programs has increased sig- nificantly in real terms over Figure 10 This Figure is a replica of Figure 44 in Chapter 6 time: from Baht 4.5 billion in 1993 to Baht 21.1 billion in 1999 (in constant 1988 baht). 54. While data on the provincial distribution of anti-poverty public spending are not available, it is possible to examine the relationship between overall government expendi- ture and provincial living standards. Figure 10, which plots total government spending per capita in a province against average living standards per capita in that province, shows that better-off provinces tend to receive significantly larger allocations of per cap- ita public spending than poorer provinces. While this is not an unusual finding (and re- flects the fact that local governments in better-off provinces are able to raise more reve- nues and thus finance their higher expenditures), it does suggest that there is substantial scope for central government spending to be used more strategically toward poverty- reduction goals. 55. Empowering the Poor. Chapter 5 reviews the remarkable advances that have re- shaped the role of civil society and participation in Thai institutions and in development itself. These advances are well known to Thais, but when seen together in an empower- ment context, the impact of these advances cannot be underestimated. The 1997 Consti- tution and the NESDB's 8th Plan are the hallmark of these advances. 56. The Constitution provides the legal foundation for community empowerment. Many of its provisions - from the decentralization of power to the local level, to the right of access to information, and the right to participate in the decision making process at all. levels - have become powerful tools for civil society in its efforts to reform the politica' and social environment of Thai society. Complementing the Constitution, the Eighth Plan (1997-2001) emphasized an agenda of "people-centered development, focusing on Thailand Social A-tonilor xiv Po veriv and I Public Policv the poor and under-privileged, and with initiatives designed to empower local communi- ties through decentralization of government, public participation in the Government's decision-making process, and the building of local capacities and self-reliance. The 9th Plan takes the poverty focus of the 8th Plan to a more central strategic concern. 57. Chapter 5 reviews Coverage and incidence of government health programs, by real per other key developments on capita consumption quintiles, 1999 the empowerment front, 60 OPocuestiqlunule XSecondqu,rtile OThirdquntile OFourthquinsile URichestquintile including decentralization 50 48 initiatives, donor programs 43 that have supported comr- 38 34 munity based development 30 24 27 25 and empowerment, and 20 19 * new Thai institutions, such 14 12 as the Community Organi- '0 4 3 zations Development Insti- o- tute. % of populaton % share among all % of population % share among all receiving benefit beneficianes of receiving benefit beneficiaries of program programr 58. The agenda for em- I .n-lnc1o-eHe lCh Card Volintanry Halth Card powerment-based devel- Figure 11 This Figure is a replica of Figure 45 in Chapter 6 opment is a broad one, and three issues are mentioned in Chapter 5 - the need for better quantitative monitoring and evaluation of investments in empowerment; the opportunity to better utilize formal tar- geting concepts and mechanisms; and the challenges of protecting the poor and ensuring participation and local voice as the Government proceeds with its decentralization initia- tives. 59. Opportunity for the Poor. Chapter 6 presents the empirical evidence on the per- formance of various programs that aim or should aim to reach the poor. An important element of opportunity for the poor is access to health services. Figure 11 presents the percentage of the population, by real per capita consumption expenditure quintile, par- ticipating in the low-income health card program, which is generally meant for the poor and needy families, and the voluntary health card, which is meant to serve the near-poor. The latter entitles cardholders to free medical care for an annual contribution of Baht 500. Figure 11 also presents the share of all beneficiaries in the two programs that are drawn from the different consumption quintiles. These two indicators are broad measures of the targeting efficiency of the programs. 60. Interestingly, a significantly larger proportion of the poorest quintile report having the voluntary health card than the free low-income health card (50% versus 19%). Ad- ministrative data also show that demand for the voluntary health insurance card increased sharply during the crisis period, even more so than that for the low-income health card (World Bank 1999). This suggests either that the poor have difficulty obtaining the low- income health cards, or that they deliberately opt for the more expensive voluntary health card in the belief that they are likely to obtain more and higher-quality medical benefits with that card. Medical staff also may have encouraged voluntary card enrollments for Thailand Social MUonitor xv Poilerty anid fu 'ublic l'o ici hospital revenue-raising purposes. Possession of the low-income health card is biased to- ward the poor, as it should be, with 38% of beneficiaries belonging to the poorest quin.- tile. However, over a third of the beneficiaries are drawn from the three richest quintiles, which suggests large leakages of benefits to the non-poor, particularly since the income threshold for eligibility for the low-income health card is only Baht 2,000 per month for a single person and Baht 2,800 per month for a family.6 As expected, the distribution of the voluntary health card is somewhat less progressive.7 61. Perhaps of greater Coverage and incidence of government educational assistance programs, concern is the fact that by real per capita consumption quintiles, 1999 nearly a third of the poorest UPoorestquintile MSecondquintle Thirdquintile 0 Fourthquintile URichestquintile quintile does not report hav- 25 25 25 24 ing either the low-income or 20 the voluntary health card. 16 Since this group is unlikely to have other forms of medi- 6 cal coverage, such as civil 5 4 4 3 servants' mnedical benefits or 0- private health insurance, it % of upper- and post- % share among all % of secondary and % share among a secondary studets beneficiaries of post-secondary beneficiaries of implies that a large number recemving benefit program students eceiving program of the poor are vulnerable to benefit the adverse economic effects Government Scholarship Program Student Loan Program of a catastrophic illness. Hopefully, these uninsured Figure 12 This Figure is a replica of Figure 53 in Chapter 6 will take advantage of the Government's recently-launched '30-baht Health Scheme.' 62. A vital part of the Thai government's opportunity programs is access to educa** tion, supported by several targeted programs, of which the scholarship and student loan schemes are highlighted here (due to availability of data). Only students in primary ancd lower secondary school are eligible for the government scholarship program, while the student loan scheme is open only to students at the upper secondary, vocational, and terti- ary levels. As Figure 12 shows, levels of coverage are very low for both of these pro.- grams, with fewer than 5% of the eligible population of students in the country receiving any benefits from these programs. The distribution of benefits is somewhat better tar- geted for the government scholarship program than for the student loan program, which is to be expected given that eligibility for the latter is restricted to students at the upper sec - ondary and tertiary levels (which have significantly fewer poor students). However, more than one-half of all scholarship recipients and two-thirds of student loan recipients, belong to the richest three quintiles, indicating high levels of leakage to the nonpoor. 6The leakages probably come about from the fact that determination of eligibility for the low-income healhtl card is at the discretion of local community leaders (e.g., the village head), who may misuse this discretion for personal gain. 7The richest quintile typically has access to other forms of health insurance, including the civil servants' Medical Benefit Scheme, the compulsory health insurance program for formal sector employees, and pri- vate health insurance. Thailand Social AIonifor xvi Paoi,rlv and Il71blic l'olicl 63. Another potential 'opportunity' intervention is micro or small-farmer credit from government lending institutions. The Socioeconomic Surveys routinely collect informa- tion on household borrowing from various sources, including the Bank of Agriculture and Agricultural Cooperatives (BAAC). 64. Relatively few households in the SES report borrowing from the BAAC. In 1999, only 2% of all agricultural households reported borrowing from the BAAC during the month preceding the survey. For those that borrowed, the average amount borrowed was large, amounting to approximately 4.4% of monthly household income. More impor- tantly, better-off agricultural households appear to account for the bulk of BAAC credit. This was true in 1996, 1998 and 1999 (Figure 13). Indeed, the data suggest that the share of the richest quintile of agricultural households in total BAAC financing increased sharply from 25% in 1996 to 59% in 1999. At the same time, the share of the poorest quintile of agricultural households fell from 11% to 5%. 65. The Government's proposed new scheme to forgive BAAC debt to low income farmers is thus well intended and designed to target the poorer farmers, but is unlikely to reach a large number of poor farmers given their apparently low participation rate in the BAAC loan programs. Share of each real per capita income quintile in total household (gross) 66. Security for the borrowing from the Bank of Agriculture and Agricultural Cooperatives, Poor. Chapter 6 also ana- 70 1996-99 (agricultural households only) lyzes some programs in n 60 59 the security area, includ- 3 31996 31998 0 1999 ing the cash transfer to the 5 elderly and public em- C 40l ployment programs to -= 32 *9 30 2 provide income support to 3 the unemployed. In the ; 20 18 case of the income trans- E . fers to the elderly, a famil- lo iar pattern is seen of low 0 Poorest Second Third Fourth Richest coverage of the population Real per capita income quintile (among agncultural households) and a mildly pro-poor bias in the distribution of bene- Figure 13 This Figure is a replica of Figure 54 in Chapter 6 ficiaries, with substantial leakages to the non-poor. However, public employment schemes, used during the eco- nomic crisis under various initiatives, show a far more efficient targeting of the poor with about 47 percent of the beneficiaries drawn from the poorest quintile and only 4 percent from the richest. The success of the public employment schemes in targeting themselves to the poor suggests that the wage rates that were offered under these schemes were probably too low to be attractive to the non-poor, with positive results to the unemployed and poor victims of the crisis. The fourth Thailand Social Monitor reported that the em- ployment schemes launched during the crisis played an important role in halting and re- versing the increases in the unemployment rate. Thailand Social tlaonilor xvii Po e7eri aldt/ Puiblic Policy Implications for Policy 67. While Thailand's record at reducing poverty during the last two decades has been impressive, the economic crisis has brought the issue of poverty back to the forefront. The incidence of poverty increased sharply in the immediate post-crisis period and may have persisted into 2000. Rapid economic growth has substantially reduced poverty in the past, but at the relatively low levels of poverty now present in Thailand (about 16%) and with growth prospects less buoyant than in the past, the government is likely to face new challenges in lifting the remaining poor above the poverty line. 68. The report presents evidence to support this contention, both from a structural perspective and from an analysis of the role of income distribution in affecting poverty outcomes. Progress in reducing poverty will depend, certainly on a resumption of vigor- ous growth, but this will probably be insufficient to achieve large gains. Such progress will also require action from Thai policy makers in curtailing any further increases in in- come inequality and in designing effective mechanisms to target the remaining poor, par- ticularly in the Northeast. 69. The report analyzes the recent performance of government expenditure and spe- cific programs in reaching the poor. It needs to be repeated that, on balance, Thailand's policies are moderately effective in comparison with those of other countries. The pro- vincial distribution of overall public spending is found to be modestly regressive (other countries show much more pronounced bias toward better-off regions and provinces), and many anti-poverty programs appear to be well-targeted to the poor. Some programs, such as the low-income health scheme, public employment schemes, and transfers to the eld- erly, are strongly pro-poor, but BAAC credit, scholarships and student loans are not, Education remains one of the most important avenues for lifting people out of poverty. and programs to help the poor advance to upper secondary and university educatior should be a high priority. 70. Poverty and Public Policy is only a step toward a comprehensive anti-poverty strategy with many analytical issues still to be addressed. In addition to the points al- ready made above on education, credit and overall incidence of public expenditure, some further preliminary implications from this study are: * Poverty is highly concentrated in a few provinces in Thailand, most of which are irn the Northeast (and a few in the South and the North regions). While the available data are not suitable for estimating poverty at the village level, early and tentative results suggest that poverty is also highly concentrated in a relatively small number of villages in the country. This means that geographical targeting of poverty inter- ventions (such as the Village Fund) to the poorest provinces and villages is likely to be cost-effective in reducing poverty. * The Northeast remains the central regional target for any anti-poverty strategy. Al - though migration appears to have mitigated the population pressures, it is probable that the better-educated, less-poor Northeast residents have migrated out of the re- gion. Evidence on the unique causes of poverty in the Northeast, and the importance Thailand,Social llonitor xviii Po w'rlv ancl Ptublic Policv of natural resource issues there, indicate that strategies to reduce poverty in the Northeast may need to be adapted to the special conditions there. * The Thai government has an impressive number of anti-poverty programs in place, and public spending on these programs has increased sharply during the 1990s. However, many of these programs have low levels of coverage, and experience substantial leakages of benefits to the non-poor. Improving the targeting of such programs is one means to reach the more stubborn pockets of poverty; * The patterns of participation in the BAAC farm loan programs suggests that the debt forgiveness moratorium, although well intended, will probably reach a small proportion of poor farmers; * Public employment programs, which were used widely during the economic crisis as a short-term safety net mechanism, appear to be the most successfully targeted security interventions, with relatively high coverage and low leakage; they also seem to have played a role in reversing the growing unemployment during 1999, and might benefit from a more structured and transparent institutional setting; and * The role of family and community self-reliance and mutual support has been a rela- tively under-emphasized Thai asset in the fight against poverty, both in managing the risks that families face in difficult times and in bringing people together (empowering them) to increase their opportunities for growth. 71. In the post-crisis environment, the efforts of government to address poverty will become far more crucial than in the past. Public policy choices - such as which programs and policies to support and how best to target their benefits to the poor - will become more central to the budget allocation and program design process than ever before. The gth Economic and Social Development Plan sets out an admirable framework for includ- ing poverty within the planning process. The next stage will be the articulation of more- detailed operational strategies to build upon the 9th Plan and to confront the problem of poverty in Thailand. Thailand Sociul .11,fotnior xix I P'ovc'r^ n u 'ii Pblich Polit'c- Chapter 1. Concepts, Measurement, and Extent of Poverty in Thailand What Is Poverty? 1. The most commonly-used notion of poverty is the inability of an individual to attain a minimal standard of living typically defined in terms of a food basket that delivers a biological calorie minimum (e.g., 2,100 calories of energy per person per day) and a small allowance for nonfood consumption such as clothing and shelter. This is the notion of absolute poverty. 2. But poverty can also be relative. Even if an individual is able to attain a minimal stan- dard of living, he may feel deprived relative to others in a society that is otherwise affluent. Al- though both absolute and relative deprivation figure in common perceptions of poverty, the for- mer tends to dominate in developing countries. Poverty can sometimes take particularly vicious forms, and these manifestations are better captured as absolute deprivation. However, as shown by Sen (1976), a measure of relative deprivation can be combined with that of absolute depriva- tion. 3. Poverty can also be defined not in terms of income or consumption but instead in terms of dep- Box 1: The Definition of Poverty rivation of basic needs, such as primary schooling, The poor can be identified via income. But in- nutrition, health care, safe drinking water and hous- come is not a genuine poverty-measuring tool ing. From one perspective, the worst manifesta- since farm incomes in Thailand fluctuate consid- tions of poverty include the occurrence of prevent- erably. Rather, asset or consumption capacity able child deaths and the feeling of powerlessness should serve as a better tool. If not, there are stemming from illiteracy and debilitation owing to other aspects of poverty that should be taken into consideration. These are happiness, social accep- ill health. The basic human needs model promotes tance, political choices (if not, at least a voice that development efforts that are geared toward meeting can be heard), and spiritual aspects. Some or- these needs directly, through the provision of goods ganizations, such as the l;JNDP, state that the and services, and indirectly, through income and "right not to be poor" is regarded as a human employment generation. right. Source: Participant comments at a TDRI Poverty 4. In spite of the importance and value of Workshop, December 22, 2000. broader notions of poverty, the starting point of any poverty assessment is generally the standard measurement of absolute poverty. This chapter gen- erally follows the conventional absolute poverty approach, based on an economic measure of welfare, while later chapters consider and discuss additional dimensions and perspectives on poverty in Thailand. Data availability, however, limits a fully comprehensive assessment of pov- erty in this Social Monitor. Measurement of Poverty 5. The measurement of poverty is a contentious science. It involves defining a minimal standard of living, establishing an absolute poverty line or threshold that accurately reflects this minimal living standard across disparate areas and regions, choosing between individual con- sumption and income as a metric of welfare measurement, and then aggregating poverty across Th1 il/ad ,)Cil/ JfonJilur I Povertv anld Public Polieiy individuals in some fashion. Each of these steps involves choices that are not always agreed upon. As a result, there are sometimes many different poverty rates for the same country at the same point in time. 6. This issue is particularly relevant in Thai- Box 2: Poverty is a Feeling land where there have been a number of different poverty lines in use over the last twenty years. "... wouldliketopointoutthatpovertyisafeel- poverty i~~~~~~~~~~~~~ng, which is difficult to measure. It is completely 3lowever, in 1996, the NESDB developed a new wrong if we measure it with income. There are poverty line that was officially accepted by the some people who live a simple live and don't feel Thai cabinet,' and which is now used as the stan- poor, but will be under the poverty line if we dard poverty line in most poverty analyses in the measure it with income. Poverty is a feeling aid country. This official line is used throughout this highly individual. National policy to remedy pov- erty thus cannot put an end to the problem parn:y Social Monitor, unless otherwise noted. Not only because it deals with income and not considering does this poverty line vary across rural and urban other aspects of the problem. The solution is to areas and across the five regions owing to spatial examine the capability of an individual in variations in the cost of living, but it also varies utilizing and controlling his resources. As there across households of different rsize and demo- are other social factors involved, it is hopeless to acrosshousehlds ofdiffeent sies anddemo- have the economists study poverty. .." graphic composition, as subsistence needs are as- sumed to differ by age and sex of individuals. The Source: Participant comments at a TDRI Povertx national average of the official poverty line was Workshop, December 22, 2000. Baht 878 per person per month in 1998 and Baht 886 per person per month in 1999. 7. To provide Box 3: The Thai Socio-Economic Surveys some perspective on the level of the The first Socio-Economic Survey (SES) was first conducted by the National Statistizal poverty line in Office (NSO) in 1957. It was only in 1988 that the survey began to be undertaken every two years (the interval was 5 years between 1957 and 1987). The SES is under- T hailand, consider taken throughout the year, and has a typical sample size of about 25,000 households. that, when annual- For instance, the SES 1998 surveyed a total of 23,549 households comprising of 86,058 ized (Baht 10,632 individuals. In 1999, the NSO conducted a special (periodic) SES to gauge the effects per capita), the of- of the economic crisis on household income and consumption. This survey had a much ficial poverty line smaller sample size than the usual SESs (7,789 households), as it was conducted only wvas only about during four months of the year (viz., June-September 1999). one-seventh The SES typically obtains information on household income and household expendi- (14.4%) of GDP ture, household consumption patterns, changes in assets and liabilities, ownership of per capita in 1999. durable goods, and housing characteristics. The SES uses a stratified two-stage sam- Converted to a pling design, with the primary sampling units being blocks for municipal areas and vil- lages for non-municipal areas and the secondary sampling units being households daily figure, the within each of these blocks/villages. poverty line is sig- nificantly lower For most years, the SES contains enough observations at the level of the province, to than the minimum calculate provincial estimates with a high degree of precision. Due to the relatively wa onstituting small size of the sample in the SES 1999, however, provincial means of poverty rates wage, con ui ng and other variables are not estimated very precisely for that year. less than one- fourth of the 'The poverty line is based on a technique developed by Kakwani and Krongkaew (1996). lh7ail/cnd .S'ocia/ Itonitor 2 Poveriv anct Plblic Policy. minimum wage in 1999 (which averaged nationally at about Baht 135 during that year). Finally, the official Thai poverty line in 1999 translated into approximately US$0.75 per day.2 8. Once a poverty line is determined and the poor identified, individual poverty needs to be aggregated in the population. By far the most common approach for aggregating poverty is by using the FGT class of aggregate poverty indices (Foster, Greer and Thorbecke, 1984). These indices include the head count ratio, the poverty gap, and the distributionally-sensitive poverty gap squared indicator (in which the deprivation of the poorest gets higher weighting). The FGT class of poverty indices has two attractive features: (i) all three indicators are special cases of a general form; and (ii) all indicators are fully decomposable and additive (which is convenient when measuring poverty for different subgroups or time periods). 9. Besides the quantitative approach outlined above, there are other means of assessing pov- erty. The poor themselves often constitute a reliable source of information about their situation, wants and needs. One of the most important considerations, therefore, in measuring poverty is the people's involvement in that process because they are the ones who live with poverty every day. Focus-group discussions and open-ended questions can illuminate aspects of poverty that remain hidden from view in large sample surveys. Such qualitative methods are used routinely now to explore such issues as structural, physical and social barriers to the poor, people's percep- tions of poverty, and family histories illuminating patterns of poverty, among others. Qualitative findings are increasingly used to restructure survey questionnaires to explore new aspects of pov- erty using quantitative methods. Qualitative work can also be done more rapidly than national surveys, and can be used, as they were in Thailand, to pose initial hypotheses on the effects of a major shock on the poor. Extent of Poverty and Changes in Poverty in Thailand 10. Headcount Ratio. The simplest and most commonly-used method of measuring poverty is the head-count ratio, which is simply the percentage of individuals in the population whose household income per capita falls below the poverty line.3 11. Data from the Socioeconomic Survey (SES) shows a sharp decline in the incidence of income- and consumption-poverty from 1988 to 1996 (Table 1) (Box 3).4 The incidence of in- come-poverty declined from 32.6% to 11.4%, with the number of income-poor declining from about 18 million to 7 million. On average, 1.4 million persons were being lifted annually out of income-poverty between 1988 and 1996. The onset of the economic crisis put a halt to these im- 2Note that this figure is different from the commonly-used 'dollar-a-day' poverty line, as that line refers to a dollar in 1993 purchasing power parity-adjusted terms. Thailand's official poverty line in 1999 was equivalent to 1993 PPP $1.60. 3Obviously, the level of poverty incidence will be sensitive to the choice of the poverty line. If the poverty line for 1999 were increased by 5% and 10%, the estimated incidence of poverty would be 17.3% and 19.2%, respectively (instead of 15.9%). Conversely, a poverty line that was 5% and 10% lower than the actual poverty line in 1999 would result in a poverty incidence of 14.1% and 12.2%, respectively. The main use of an absolute poverty line lies in comparing poverty rates over time and across population subgroups. 4Most of the analysis in this Social Monitor is based on primary analysis of data from the Socioeconomic Surveys (SES). See Box 3 for a description of the SES. hailaand, S ocial .11an)lor 3 Poveriv and Public Policyl pressive rates of poverty decline. The head-count ratio of income-poverty increased from 11.4% in 1996 to 13% in 1998 and 15.9% in 1999.5 This meant that an additional one million persons became poor in 1998, with 1999 seeing another 2 million persons added to this number.6 Table 1: Measures of Poverty, 1988-99 Headcount ratio*** Poverty gap ratio Severity of poverty ratio Based on: Based on: Based on: Year Income Consumption Income Consumption Income Consumption 1988 32.6 27.6* 10.4 6.8* 4.6 2.4* 1990 27.2 19.5 8.0 4.2 3.3 1.4 1992 23.2 17.6* 6.8 3.7* 2.8 1.2* 1994 16.3 9.8 4.3 2.0 1.7 0.6 1996 11.4 8.1* 2.8 1.6* 1.1 0.5* 1998 13.0 13.6* 3.3 2.7* 1.3 0.8* 1999** 15.9 14.3* 4.3 3.0* 1.8 0.9* Note: *Based on data obtained from a short consumption module. Consumption- poverty estimates for other years are based on a long consumption module. See footnote 6 in text for more details. **Data for 1999 refer to two (second and third) quarters only, while estimates for all other years are based on all four quarters of data. See footnote 4 in text for more details. ***The point estimate of the head-count ratio for each year is significantly different from the estimates for every other year at the 0.05 level of significance. 12. Poverty Gap. A shortcoming of the head-count ratio is that it does not say anything about the depth of poverty, viz., the extent to which the incomes of the poor are below the poverty line. 5Since the Socioeconomic Survey (SES) of 1999 was a special survey that was conducted only during tht four months of June-September 1999, results from earlier SESs are strictly not comparable unless data from the earlier SESs are analyzed only for the second and third quarters (which cover the June-September months). However, it was observed that the use of two or four quarters of data for earlier SES samples made little difference to the results presented in this Monitor. Therefore, unless otherwise noted, statistics presented in this Monitor for years other than 1999 are based on data covering all four quarters, while those for 1999 are based on two quarters of data. 6The analysis of income- and consumption-poverty during the crisis period is complicated by issues of timing in the collection of SES data on income and issues of comparability of consumption data across different SESs. Income data in the SES are collected for a 12-month reference period preceding the survey, which is itself undertaken over the entire year. As such, income data for 1998 for nearly one-half of the SES sample capture pre-crisis (pre-July 1997) income, which might explain why income-poverty from the SES shows a relatively modest increase in 1998 (from 1996 levels) and a large increase in 1999. In contrast, national accounts data show a large decline in GDP per capita in 1998 and a recovery in 1999. Since expenditure data in the SES typically refer to consumption over the week or month prior to the survey (there are very few items, such as education, for which expenditures refer to the past year), consumption-poverty estimates are more consistent with national accounts data - showing a large increase in poverty in 1998 and a much smaller increase in 1999. In addition, there are issues of comparability in the SES data on household consumption expenditure as well. Every four years (i.e., 1990, 1994, 1998), the SES obtains de- tailed data on household expenditures on 140 or so food items. In these years, the NSO calculates aggregate con- sumption figures based on this 'long' food questionnaire. However, during the other years (e.g., 1992, 1996, 1999), only a short food questionnaire is fielded, which obtains expenditure on 15 major food categories, and consumption data reported by the SES are based on this questionnaire. This creates an inconsistency in che consumption-poverty series from one SES to another, as consumption expenditure based on a short list of questions typically resulhs, in an underestimate of true consumption. For this report, we obtained from the NSO consumption data from the short module for 1998 (which was a long consumption module year), and the consumption-poverty estimates reported in Table I for 1998 are based on data from the short consumption module. This makes the 1996, 1998, 1999 consump- tion-poverty estimates comparable. 7 hailand Sociacl ;Aonilor 4 Poverlil andl Pziblic Policyl The poverty gap index fills this shortcoming by measuring the shortfall between the incomes or consumption expenditures of poor households and the poverty line. The sum of all individual poverty gaps in a sample can be interpreted as the minimum amount of income transfers needed to bring all of the poor just up to the poverty line in the presence of perfect targeting.7 A poverty gap of 4.3% in 1999, as shown in Table 1, suggests that, if perfect targeting were possible, an income transfer of Baht 38 (= 0.043 x national poverty line of Baht 886) per person per month would be required to eliminate poverty. The total volume of income transfers required to bring all of the poor to an income level just above the poverty line would then be Baht 28 billion (= Baht 38 x 12 months x 61.66 million persons).8 13. The poverty gap measure follows roughly the same pattern over time as the head-count ratio. There was a small increase in the poverty gap between 1996 and 1998, but a much sharper increase from 1998 to 1999. 14. Severity of Poverty. A problem with the poverty gap index is that it is not sensitive to the distribution of income among the poor and hence to the severity of poverty. A redistribution of income from a destitute individual to someone much better off (but still under the poverty line) will leave the poverty gap index (and the head-count index) unchanged, although it is clear that this redistribution will have increased the severity of poverty in the population. The poverty gap squared index, which belongs to the broader family of Foster-Greer-Thorbecke (FGT) indices, is sensitive to the distribution of income among the poor, since it weights the shortfall between an individual's income and the poverty line more heavily the further below the poverty line that in- dividual's income falls. A shortcoming of this index is that, unlike the head-count and the pov- erty gap indices, it does not lend itself to an easy interpretation. Its use, therefore, lies mainly in comparing the severity of poverty over time or across different subgroups in the population.9 15. Like the headcount ratio and the poverty gap index, the poverty gap squared index also fell sharply from 1988 to 1996, but then reversed itself in 1998 and 1999. The increase in all three measures of poverty in 1998 and 1999 was sufficient to erase virtually all of the progress on poverty reduction that had been achieved since 1994. In this sense, the impact of the economic crisis in Thailand on poverty was profound. Povert and Unemployment 16. Unemployment increased significantly during the crisis, more than tripling from 0.9% to 3.4% between the third quarters of 1997 and 1998 (Figure 1). As the labor force gradually in- creases again - during the crisis, many young adults returned to school, women turned to raising 7Perfect targeting implies that each individual below the poverty line would receive a transfer that would permit his or her income or consumption to reach the level of the poverty line and that no one above the poverty line would receive any transfers. 8lt should be realized that these are hypothetical numbers. Besides the fact that perfecting targeting is rarely possible in practice, few developing-country governments would choose to continue making income transfers to the poor in perpetuity. In addition, there would be significant disincentive effects of making transfers to each poor individual based on his or her income shortfall (relative to the poverty line). 9AII of the three measures discussed here - viz., the head-count ratio, the poverty gap index, and the poverty gap squared index - are fully decomposable across different subgroups in the population. 7hailtand Social Ifoui/or 5 Pf1(eVltv undc Public Policy' families, and older citizens retired early - the labor markets have done a modest job of absorbing workers. Over 650,000 Thais entered the labor force between the third quarters of 1999 and 2000, and the labor markets generated nearly one million jobs, lowering the unemploymen: rate from 3.0% to 2.4%. However, the May 2001 figures indicate the recovery may be slowing. The labor markets, unlike earlier in the recovery, were not able to absorb all the new entrants tc the labor force, and the unemployment rate rose slightly to 4.2% from 4.1% year on year. Unlike the recovery between 1991 and 1992, this recovery has been modest and protracted so far. Number of employed persons and unemployment rate, third quarter, 1989-2000 33,32500 40 ..n X 3;p32,500 No. of employed peron A 32000 K 2 0 5 32,500 89 90 91 92 93 94 95 96 97 98~~~~~~~~~~~ 99 00 31,000 2 .5 30,500 30,5000E Figure 1 17. Throughout the crisis, labor force data (based on the Labor Force Surveys of the NatiLonal Statistical Of fice) show that the lowest wage and poorly-educated workers have endured dis,pro- portionately large impacts. These patterns were analyzed in Thai Workers and the Crisis (WTorld 3ank 2000) and still persist. This can be seen from regional data on the labor force. All the re- gions are rebounding with declines in unemployment (Figure 2), but the poorest region the ortheast - is the slowest. While the other regions were recovering by 1999, the unemplo Nment rate peaked that year in the Northeast. The third quarter 2000 unemployment rate in the Northeast is still nearly five times that of the third quarter 1997 rate - viz., 3.2% and 0.7% respectivelsp. 18. Another indicator of the impact of the crisis is the number of employed with a primary education or less. The percentage of the beworor which has a primary education or less ha.s de- clined throughout the past six years, falling from 76.7% of the workforce in the first quailyer of 1995 to 65.9% in the first quarter of 2001. During the crisis, this indicator dropped more steeply from 75.2% to 71.4% in one year (between the third quarters of 1997 and 1998), as uneducated workers lost employment and dropped out of the labor force in large numbers. Labor force pat- terns thus reflect the poverty increases recorded in the income and consumption data, as lower- educated workers (a reliable proxy for income-poverty) tended to take the brunt of the crisis. Pi ailand?Social Montlor 6 Povceri andtl Public Policy Unemployment Rate by Region, third quarter, 1996-2000 4.5 4 -~-Bangkok Metropolis 3.5 -U-- ~~~~~~~~~~~~~~~~~~~Central 3 Region 2.5 Region .-4-- Northeastern 1.5 i1 S ¢! t < m | ffi~~~~~~~~V Southem 1.5 Region 1 0. 3Q96 3Q97 3Q98 3Q99 3Q00 Figure 2 Intemational Comparisons 19. How does poverty in Thailand compare to that in the other countries of the Asia-Pacific region? Obviously, to compare poverty across countries, one cannot use national poverty lines. A commonly-used international poverty line is $1.50 per day per person (expressed in 1993 pur- chasing-power parity dollars). Additionally, since comparable data are available for consump- tion- poverty for the other countries, we need to use the measure of consumption-based poverty. 20. Figure 3 shows the trend in consumption-poverty over the 12-year period from 1987 to 1999 for four countries in the East Asia region. Thailand falls between Indonesia and Philippines on the one hand and Malaysia on the other in terms of the extent of poverty. During the early 1990s, three of the four countries - Figure 3 Indonesia, Malaysia and Thailand - Headcount ratio of consumption-poverty, 1987-99, selected Asian countries experienced dramatic and compa- (poverty line definted at 1993 PPPSI.5O per person per day) rable rates of reduction in poverty 50- _ incidence. (The Philippines was 45' - ndones the only country among the four to 40 Philnppines experience virtually no change in 35 . poverty between 1988 and 1994.) F30 * -; = , 25 21. In the aftermath of the eco- X 20 -. Tnailand nomic crisis, Indonesia, Malaysia is s and Thailand all experienced an -o Malaysa increase in poverty. (Post-crisis data on poverty are not available 0 for the Philippines.) However, the 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 7hai/and Social A'knitor 7 Povlteriv antd Public Polici) increase in poverty in Indonesia was significantly sharper and more pronounced (from about 26% in 1996 to 37% in 1999) than in Thailand. While Malaysia too experienced an increase in pov- erty in the aftermath of the crisis, its level of poverty incidence in 1998 was almost negligible (0.74%). 22. What these data indicate is that, despite some differences, Thailand's overall performance on poverty reduction closely mirrors the experience of at least two other countries in the regioin - Malaysia and Indonesia. Overlap Between the Income-Poor and the Consumption-Poor 23. In Thailand, the convention has been to measure poverty and inequality based on individ- ual and household incomes. This approach is different from that adopted in many other develop- ing countries, where poverty is typically measured by the shortfall of consumption expenditure relative to the poverty line. The choice of income versus consumption expenditure as the metric with which to measure poverty is important because poverty estimates can differ significantly using the two approaches. Which is the best measure for poverty analysis in Thailand and why? 24. Consumption is generally believed to be a better indicator of an individual's long-term welfare than current income. This is because individuals and households tend to smooth con- sumption over time by saving when income is high and borrowing when income is low (relative to 'permanent' income). In addi- Figure 4 tion, income is relatively more sub- Indices of mean monthly real income and consumption ject to measurement errors than expenditure per capita, 1988-99(1988 =100) consumption, especially in a de- 20077 veloping country where a signifi- Income cant portion of the income is from -*O -Consumption self-employment activities (such as 163 farming). 160 25. At the same time, the use of 1401 1_: consumption expenditure as a / f measure of individual welfare is 'IO also not free of problems. House- 1126 hold expenditure on consumer dur- to19o 88 1 1992 1994 1996 1995 19 ables and other unexpected items (such as expenditures on a catastrophic illness) can cause considerable noise in the data. Addi- tionally, from a conceptual viewpoint, an individual's welfare should be based on his or her op- portunity for or 'capability' of consumption - not actual consumption - and income more accu- rately reflects these opportunities or capabilities. 26. How sensitive are poverty estimates in Thailand to the use of the income or consumption measure? Figure 4, which shows indices of mean real income and consumption expenditure per capita over the 1988-99 period, indicates that living standards, whether measured by either in- come or consumption, improved dramatically between 1988 and 1996, but with income growing T hailand Social AK/ownitor 8 Poveriv andl Public Policv faster than consumption. With the onset of the economic crisis, income growth slowed down sharply while consumption actually declined. In principle, the difference between the income and consumption expenditure lines in Figure 4 reflects the amount of household savings per cap- ita, but, in practice, it also reflects errors in the measurement of consumption and income. This is particularly likely to be the case in Thailand, where the SES measures household income dur- ing the 12 months preceding the survey but consumption expenditure during the past week. 27. The poverty headcount ratio follows virtually identical patterns, depending upon whether income or consumption is used as the metric of welfare. By both criteria, poverty fell sharply between 1988 and 1996, and increased in 1998 and 1999 (Figure 5). What is interesting to note, however, is that the incidence of consumption poverty is typically lower than that of income pov- erty for most years (with the sole exception of 1998), even though mean income per capita is typically greater than mean con- Figure 5 sumption per capita (Figure 5). This Percentage of poor based on income and consumption expenditure, is explained by the fact that the dis- 1988-99 tribution of income is more unequal 35 32.6 than that of consumption expendi- --Income ture - i.e., consumption is greater 272 -'-Consumption than income at the lower end of the 25 27\ 23.2 distribution while income exceeds consumption at the upper end of the - 20 16\ distribution. Since the poverty line 195 63 \ 9 is typically based at the lower end of \ 114 13_ the welfare distribution, estimated 10 130 143 consumption poverty is lower than 9.8 8.1 estimated income poverty. 5 1988 1990 1992 1994 1996 1998 1999 28. Figure 6 shows the cumula- Cumulative distribution of per capita income and expenditure, 1999 tive distribution of per capita income '° and consumption expenditure in 0.9 7 1999. Because the poverty line oc- 0.8 o/ curs below the point of intersection 0.7 Per capita expendihtue // of the two curves, a slightly larger o 06 - proportion of the population is in- Pe Pcaptaincome come-poor than consumption-poor. 0. c/o 0~ 0.4 However, if the poverty line were to . / the right of the intersection point, the 0.3 proportion of consumption-poor U 02 would be greater than the proportion 0.1 of income-poor. 0.0 12. 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5 12.0 29. The fact that estimates of in- Figure 6 Log ofper capita icome/consumption expnditure come- and consumption-poverty have followed similar trends over time (Figure 7) may give the impression that there is a large overlap among those identified as poor by both criteria. However, such an impression would be inaccurate. Figure 7 shows that, in 1999, only 62% of individuals lhauilani docia/ Alfonifor 9 Poverly antidPublic Policy that were identified as poor by the consumption criterion were also poor by the income criterion. Of those identified as income-poor, only 56% were also consumption-poor. The degree of agreement between the two measures of poverty is thus low, and has fallen since 1988, with a significant increase during the crisis. Also shown in Figure 7 is the proportion of Thai people identified as both income- and consumption-poor, and this too fell between 1988 and 1996, but then increased in 1998 and 1999. Why is this so, and what does it mean for understanding pov- erty in Thailand? Figure 7 30. Since consumption expendi- Agreement between income- and consumption-poverty measures, 1988- ture measures long-run or perma- 8o 99 nent income, it is tempting to think 72 68.8 of the consumption-poor as the 613 622 permanently- or chronically-poor 60 " 522 522 't O and the income-poor as the transito- 0 rily-poor in Figure 7. However, as 8386 noted earlier, consumption expendi- 4 ture and income are measured over 30 - *- Percentage ofincomep-poor ho are alsoincome-poor different intervals in the SES, with 20 200 142 -%ofincome-andconsumption-poor consumption being measured over a 12A 8 reference week and income being 10 6.1 5.7 measured over 12 months. This 0 complicates the interpretation of the 1988 1990 1992 1994 1996 1998 199) different trends observed in Figure 5, as they could well be the result of differences in the temporal measurement of income and con- sumption. 31. What about the proportion of the Thai population that is both income- and consumption- poor? Figure 7 also shows the proportion of the population that is identified as poor by both cri- teria. This measure could serve as the lower bound on the incidence on poverty in the country. Thus, for 1999, one could say confidently that, at a very minimum, 8.9% of the Thai population was poor, although the corresponding rates of poverty by the income and consumption criteria were 15.9% and 14.3%, respectively. Reliability of Survey-Based Estimates of Consumption and Income 32. In addition to the low overlap between the income- and the consumption-poor, there is also the issue of reliability of SES estimates of income and consumption expenditure. In other words, how accurately does the SES estimate income and consumption relative to their true val- ues? While true consumption and income are never observed, it is possible to compare the SES estimates of aggregate income and consumption expenditure to those obtained from the system of national accounts (SNA). Unfortunately, there is a large divergence between the SNA- and SES- based estimates of income and consumption expenditure, with estimates of both income and ex- penditure obtained from the SES data being 32-42 percent lower than those obtained from the SNA (Table 2). Further, the discrepancy between the two sets of estimates varies by the scurce of income. While wage income is underestimated by the SES by merely 16 percent (relative to Diailand Social MVonitor 10 Poi)eriv and Public Policv. the national accounts estimates), farm and non-farm profits are underestimated by 44-53 percent and income from rent, interest, dividends and other sources is underestimated by 132 percent. This means that the incidence of poverty is likely to be overestimated with household survey data relative to national accounts data. On the other hand, income inequality is likely to be underes- timated by household survey data, since income from interest, dividends and rent, which is often an important source of income inequality, appears to be heavily underreported in the SES. 33. Two points are worth mentioning here. First, this discrepancy between national accounts- and household survey-based estimates of income and consumption is not unique to Thailand. In fact, this is a common problem in many developing countries. Second, there is no assurance that the national accounts estimates of income are more reliable or accurate than survey estimates. Indeed, the national accounts estimates themselves are based on labor force, enterprise, and agri- cultural crop surveys as well as on administrative data on production and tax collections - all of which are likely to be subject to measurement errors. Table 2: Aggregate household consumption and income, by source, SES and national-account estimates, 1998 (billions of current baht) National % underesti- Measure SES accounts mation by SES Household expenditure 1,914 2,529 32.2 Household total income 2,157 3,058 41.8 Wages and salaries 1,142 1,326 16.1 Fann profits 253 363 43.5 Non-farm profits 502 768 53.0 Rents, interest, dividend & other income 259 601 131.8 Policy and Research Issues 34. The economic crisis had a large impact on poverty in Thailand, especially when viewed in the context of the strong poverty decline that had taken place in the 1988-97 period. Indeed, many of the gains in poverty reduction achieved since 1994 were erased during the crisis years. The analysis in this chapter suggests that although the choice of consumption versus income as a metric of living standards does not affect greatly the incidence or the trend in incidence of pov- erty, it makes a large difference to which households and individuals get identified as poor or non-poor. This low overlap between the two measures of poverty means that any attempt to tar- get the poor will reach different groups of people depending on which measure is used. Policy makers have a choice of targeting the more volatile (transitory) income-poor, or the more long- term (perhaps structural) consumption-poor. Further analysis of this low overlap is thus an im- portant priority. In addition, the significant discrepancy between household survey- and national accounts-based estimates of mean income is troubling and needs further exploration. 7Thail(and Social ,oVtonifor Poverly and Public Policl Box 4: Dissemination of Information on Poverty The Office of National Economic and Social Development Board (NESDB) has issued several development publications each year, including the quarterly Economic and Social Development Journal, the monthly Development News Bulletin, and the Annual Report on National Income Accounts, including the newsletter on Prosperity Decentralization. The latter aims to disseminate information about program implementation, particularly on programs of rural development and redistribution of prosperity to the rural areas. These publications are produced in Thai for disseminating development issues and outcomes to the general public. Recently, the Development Evaluation Division (DED) of the NESDB received technical assistance from the Asian Development Bank to issue a quarterly newsletter in both Thai and English on "Indicators of Well-Being and Policy Analysis." An initial aim of this newsletter was "... to disseminate information on recent research on the development of indicators of the Thailand's 8th National Economic and Social De- velopment Plan..." Taking into account the holistic approach and main development strategies of the 8th plan, the first issue suggested seven components of well-being - health and nutrition, education, working life, family life, economic growth, poverty, inequality and economic welfare, environment and safety, and governance. Four of the issues of the newsletter presented substantive information about poverty, such as the development of poverty lines based on nutritional requirements and spatial price variations, the inci- dence of poverty by geographical and demographic characteristics, the impact of the economic crisis on poverty. These issues were based on household survey data from the Socioeconomic Surveys and the Labor Force Surveys. The response to these issues was overwhelming and they have been widely quoted and dis- cussed. After completion of Asian Development Bank's technical assistance, the NESDB plans to finance this pub- lication out of its regular budget. Future publications were expected to address export, labor, health and nutrition, and education, respectively. During the 9th Plan, the newsletter will focus on analyzing the seven components of well-being and monitoring development performance, using data from the Socioeconomic Surveys. Source: NESDB. Thailand Social MVfonitfor 12 Poverty and(t Public Polit y Chapter 2. Who are the Poor of Thailand? 35. In order to target poverty-reduction programs to the poor, it is important to know their ob- served characteristics, such as their place of residence, the geographical regions in which they are concentrated, their educational levels, their family size, and the usual occupations in which they can be found. This profile of poverty can also serve as a baseline of information against which the impact of poverty programs can be measured. The profile can also be used to help estimate the costs of targeting the poor for a specific program. Region of Residence 36. Geographic targeting is by far the most commonly-used method of directing policy inter- ventions to the poor, as it is administratively easier to implement than other forms of targeting, such as household income-based targeting, or individual needs-based targeting. But the success of geographic targeting depends largely on whether the poor are concentrated or dispersed across geographic regions. 37. In Thailand, there is an ex- Figure 8 tremely strong regional dimension 5a o by rtgion, 198o, 19co and ;999 to both poverty levels and the reduc- y , 9 tion of poverty over time. Histori- 451 9 9 cally, the Northeast has been the 40 poorest region in the country, fol- c,- 31 33 32 lowed by the South, North, Central 0 30- 27 region, and Bangkok (in that order). l 25 In 1988, for instance, nearly one- 2 20 19 half (48.4%) of all Northeasterners . 15 were poor, as compared to only 6% 0 8 6 of Bangkok residents (Figure 8). By 6 6 1996 - the year before the economic n O 0 crisis - the incidence of poverty had Northeat South North Central Bangkok declined in all regions, but the Northeast continued to be the poor- est region in the country. In the period after the crisis (1996-99), the incidence of poverty in- creased sharply in the Northeast, somewhat in the South and Central regions, but declined in Bangkok and the North. The fact that the relative ranking of the regions by the incidence of pov- erty was roughly similar in all three years (1996, 1998 and 1999) suggests that the regions that were poor to begin with did not experience more rapid poverty reduction. 38. In fact, the evidence suggests exactly the opposite - viz., that poverty has declined more rapidly in the better-off regions than in the poorer regions. This is observed clearly in Figure 9, which shows the headcount ratios of poverty from 1988 to 1999 across the five regions, starting from a common base of 100 in 1988. Figure 9 shows that the Northeast had the smallest relative decline in poverty between 1988 and 1996, with the incidence of poverty in 1996 being 40% of its 1988 level. The South and the North were also relative laggards in poverty reduction, having Thiladnd Social Alonitior 13 Poi1vrty l ndi Puiblic Policy6 poverty rates in 1996 that were Figure 9 about a third of the corresponding Headcount ratio of income-poverty, by region, 1988-99 1988 levels. Bangkok was the best 100 (1988povetyeadcount 100) performer, having achieved a pov- 90 \ Northeast 90 erty headcount in 1996 that was 80 -*-South So only 10% of its 1988 level. a70 \Bangkok - 70 39. The regional disparity in 0 X0 poverty reduction performance ac- E tually grew wider with the onset of 4\ the crisis. Between 1996 and 1999, 30 30 the incidence of poverty increased 20 20 sharply in the Northeast, somewhat 10 1 in the South and Central regions, 0 3 and actually declined in Bangkok 1988 1990 1992 1994 1996 1998 19)9 and the North. Thus, by 1999, the poverty headcount in the Northeast was nearly two-thirds of its 1988 level, while the correspond- ing ratio for Bangkok was a mere 3%. The North was somewhere in between, having a poverty headcount in 1999 that was one-third of its 1988 level. 40. The sharply adverse impact of the crisis on poverty in the Northeast, the South, and the North may seem puzzling in view of the fact that the economic crisis of 1997 originated in the financial center of Thailand (viz., Bangkok) and that the rural areas in 1998 enjoyed favorable agricultural prices. However, several mechanisms seem to have transmitted the initial Bangkok focus of the crisis to the rest of the country and particularly to the Northeast. As the financial shock spread to the real economy shortly after July 1997, aggregate demand fell, and firms re- sponded by cutting back on employment and reducing the wages paid to employees. This impact fell heavily on the low-wage sector and on the self-employed 'own-account' workers. This re- sulted in a modest decline in the amount of remittances that migrant workers in Bangkok and elsewhere sent to their families back in the Northeast. In addition, although there was no large- scale return migration of migrant workers out of Bangkok, the heavy volume of out-migration from the Northeast, which had been a mainstay of Thai labor markets in the last two decades, es- sentially ceased during the crisis years, shutting down a major income source for the Northeast and its excess labor.'0 Thus, the collapse in demand, both consumption and investment, spread quickly and hit the poor the hardest. Also, the decline in remittances and the reduced outflow of migrants from the poorer regions of the country to the better-off regions had adverse effecis on household incomes and poverty in the Northeast as well as in the North and the South. 10See World Bank (2000) for a discussion of the trends in migration in the aftermath of the crisis. Chapter 4 in this Monitor also discusses the remittance and migration issues. Thailand Social Mifonitor 14 Povvrtly anid Puihlic Policy Rural-Urban Differences 41. The differences in poverty Figure 10 across rural and urban areas mirror Headcount ratio of income-poverty (%), those across regions. Poverty is by rural/urban area, 19S8, 1996 and 1999 most pronounced in the rural areas, 40 followed by sanitary districts and 35 . 1988 * 1996 O1999 municipal areas, and this was true in every one of the years 1988, 1996 °3- and 1999 (Figure 10). Figure 11 25 shows that the municipal areas ex- .O 20 perienced the most rapid decline in 1 poverty between 1988 and 1996, - while the rural areas enjoyed the 10 9 8 smallest decline. Between 1996 and 5 -2 1998, the incidence of poverty in- 0 creased significantly in the rural ar- Rural Sanitary Municipal eas and the sanitary districts, while it continued to fall in the municipal areas. 42. What Figure 10 suggests is Headcount ratio of income-poverty, by rurallurban areas, 198-99 that poverty is now largely a rural 00o (1988 poverty headcount = 100) problem in Thailand. Of course, 90 there is some poverty in the sanitary o -+-Rural districts as well, but it is relatively a S Sallitary districts modest in comparison to that found Muncipalarea in the rural areas." This means that 60- policies to combat poverty in Thai- 5\ land must focus largely on the rural m 40 areas. 301 20 A Provincial Poverty Map 10 43. Large as the regional differ- 1988 1990 1992 1994 1996 1998 1999 ences in poverty shown in Figure 12 Figure 11 are, they pale in comparison to the provincial variations in poverty incidence. For instance, an average poverty headcount ratio of 24% in the Northeast in 1998 masks the enormous disparity in poverty rates across the two provinces of Mahasarakham (5%) and Surin (38%). Figure 12 high- lights these provincial differences by showing a 'poverty map' of Thailand.12 The Northeastern provinces of Surin, Kalasin, Sakon Nakhon, and Roi Et, the Northern province of Mae Hong Son, " Of course, the near-zero rates of income-poverty in municipal areas and sanitary districts depend upon the selection of the spatial price index, which 'corrects' for the higher cost of living in urban areas. The use of a different spatial price index might yield higher rates of income-poverty in the urban areas. Additionally, urban areas might have non- negligible rates of, say, nutritional-poverty or health-poverty (as opposed to income-poverty). 12The poverty map is shown for 1998 instead of 1999, since the Socioeconomic Survey (SES) of 1999 was a special survey that had a much smaller sample than the usual SES, and this sample was not representative at the provincial level. Thoiland Social .1ionitor 15 P)oveCr/J (Itid I'uhlic Polcic, and the Southern provinces of Narathiwat and Yala, are observed to have some of the highest poverty rates in the country. Poverty is also widespread in other Northeastern provinces ar,d in a few of the Northern and Southern provinces. How Concentrated are the Poor Geographically? 44. If the objective of policy is to try to lift the largest number of poor out of poverty with special interventions, it is more useful to look at the distribution of the poor across provinces - not at the incidence of poverty across provinces. The two measures will yield different answers if the provinces that have the highest rates of poverty in- cidence are generally not as heavily populated as the prov- inces having lower rates of poverty incidence. In the case of Thailand, however, many of the Northeastern provinces having the highest incidence of poverty are also among the most populous provinces in the country. For instance, the province of Khon Kaen is the third most populous 0- 5 province in the country, and the provinces of Udon Thani, 5 - 13 Buri Ram, Si Sa Ket, Surin and Roi Et are all amonc, the 13 - 21 ten most populous provinces in the country. As a result, 21- 31 the two measures of poverty incidence and the distribution u 31 - 46 of the poor yield virtually identical results. 45. Figure 13, which shows the in- Figure 12: Incidence of income-poverty (%) by dividual as well as the cumulative con- province, 1998 tribution of the poorest 17 provinces to the total number of poor nationally, indicates that only 17 (out of a total Contribution of the 17 poorest provinces to national poverty, 1998 of 76) provinces accounted for nearly two-thirds of all the poor in ^ 6 Ct t Thailand in 1998. In fact, the four t 60 57C7ontribution topoverty O *~~~ Contribution to poverty 52.1 - [D poorest provinces accounted for a g so 449 0 quarter of all the poor in the coun- 0 40 369 try. The fact that poverty is so D 28.3 i highly concentrated indicates the 1 extreme importance - and relative X 20 simplicity - of provincial targeting 'E io T73652.a4644 A 353.2.222.1 8 of poverty interventions. ° I IL, 46. In principle, targeting pov- pSOa6 Vt'X 5o erty interventions to a smaller geo- "." graphical unit, such as a village, Figure 13 could be even more effective. The SES data are suggestive of poverty in Thailand being extremely concentrated in a relatively small number of villages. For instance, in 1998, a mere 10% of the poorest villages in the SES sample Thailand Sociau 'l'/onitor 16 Poverly (nld I'zPblic PolicY accounted for nearly a third of all the poor, and slightly more than a quarter of the poorest villages in the sample accounted for all of the poor (Figure 14). Since the SES covers only a fraction of all the villages in the country and the number of sampled households Cumulative distribution of poverty across villages, 1998 in each village is too small to be 100 representative, these numbers are 90 merely suggestive of possible pat- 80 terns. There are promising new 70 methodologies available for more o 60 accurate identification of village 50 poverty on the basis of merged 40 household survey and population E 30 census data (see Box 5). It would U 20 be worthwhile to explore the use of 10 such methodologies to identify the 0 poorest villages in the country, so 0 10 20 30 40 50 60 70 80 90 100 that government initiatives, such as Cumulative % of villages (raked by poverty incidence) the Village Fund Scheme, could be Figure 14 better targeted to needy villages. Household Size and Composition 47. One near-universal identify- Headcount ratio of income poverty, by household size, 1992-99 ing characteristic of the poor is their 35 34 large family size. In Thailand, as well, there is a very strong positive 30 101992 *in996 [11999 27 27 relationship between poverty inci- 25 dence and household size, which 21 21 2020 seems to have become stronger over 8 20 18 time (Figure 15).3 For example, in 15 14 1 5 1999, the incidence of poverty 1l among one-person households was 10 7 only 0.8%, while it was as high as 5 27.4% among households with seven or more members. 0l,_ 1 2 3 4 5 6 7 ormore Household size (number of members) 48. The data also indicate pov- F- r 15 erty declined much more rapidly dur- Figure 15 ing the 1990s among smaller households relative to larger households. For instance, poverty in- cidence among one-person households in 1999 was less than a third of its corresponding level in 13The strong relationship between poverty incidence and family size shown in Figure 15 may be overstated since there is no adjustment for economies of scale in household consumption in the construction of the Thai poverty line (although there is an adjustment for household age-demographic composition differences). To the extent that there are economies of scale/size in household consumption, the basic consumption expenditure needs of successive household members will be lower than indicated by the poverty line, and this will result in an overestimation of pov- erty incidence for larger households. Thailand Social fon itor 17 /)Overl (tfl(I PZbhlic Polic y 1992, but among households with seven or more members the incidence of poverty in 199'3 was as high as 82% of its 1992 level. 49. In addition to size, household composition is another important correlate of poverty. Households with a large dependency ratio - i.e., the ratio of the number of children under 15 and adults over 60 to the number of adults aged 15-60 years - are much more likely to be poor' than households with a smaller dependency ratio. In 1999, households with a dependency ratio of more than one were more than three times as likely to be poor than households with a dependency ratio of zero (Figure 16). As in the case of household size, poverty declined more rapidly during the 1 990s among low-dependency households than among high-dependency households. Headcount ratio of income poverty, by dependency burden, 1992-99 50. Neither of these relation- 45 4 42 ships requires much explanation. In 40 most cases, an increase in house- 35 ET1992 * 1996 0[1999 hold size comes about due to an in- 31 crease in the number of children. 26 26 Thus, larger households are also the r ones with higher dependency ratios. $ 20 l 18 As the number of dependents in- 15- 1 creases relative to earners, there is lo 7 less income (and consumption ex- 5 penditure) available to each house- 0 hold member and thus more pov- 0 0-0.5 051-i-00 >1.00 erty. What the survey data addition- Depende-cy burden (Ratwo of members aged 0-14 and 60 & over to those aged 15-59 years) ally show is that large households Figure 16 with a high dependency burden are more likely to stay in poverty over time, with the result that poverty rates decline much less rap- idly for these households than for other types of households. Age and Sex of the Household Head 51. Poverty typically shows a U-shaped relationship with the age of the household head in most countries. However, in Thailand, there is an additional sex dimension to the relationship. Among male-headed households, the incidence of poverty is lowest among households headed by an individual under the age of 30, but it does not vary significantly across heads who are above 30 years of age. The lower poverty rate among households with younger heads probably reflecrs the fact that young household heads are more likely than older heads to be better-educated.14 14 Of course, the lower poverty rate among young adult male household heads could in part be due to such households being small in size. Since the poverty lines used in Thailand assume no scale economies, any household characteris- tic that is correlated with small household size is going to appear less poor. Thailand Social .bonit oe 18 Poverlv amtld Pzblic Policv 52. In the case of female-headed Figure 17 households, however, poverty has a Headcount ratio of income poverty, by age and sex of household head, much sharper gradient with respect 1992.99 to the head's age. For instance, in 25 25 24 25 1999, the incidence of poverty was eight times greater among house- 20 18 ]8 19 holds headed by a woman aged 60 16 16 and over than among households 15 13 1 headed by a woman under the age . 10 of 30 (Figure 17). 10,- 53. However, a comparison of 52 poverty rates among male- and fe- _ male-headed households does not under 30 30-44 45-59 60&over under30 30-44 45-59 60 & over show higher poverty rates among Male-Headed (Age ofhead) Female-Headed (Age ofhead) female-headed households, as is commonly believed. Indeed, the incidence of poverty is typically lower among female-headed than among male-headed households.15 The reasons for this are not clear; perhaps, female-headed households are those in which the adult male has migrated temporarily to an urban area for better wages. If so, female-headed households are more likely than male-headed households to receive remittances that keep them out of poverty. 54. The data also indicate that households headed by young women (those under the age of 30 years) saw the sharpest decline in poverty during the 1990s (Figure 17). The incidence of poverty in this group declined from 10% in 1992 to merely 2% in 1999. Indeed, this was the only demo- graphic group experiencing a decline in poverty incidence even during the crisis period (1996 to 1999). Education of the Household Head 55. Another important and Figure 18 universal predictor of poverty is Headcount ratio of income-poverty, by household head's schooling, education. In Thailand, espe- 35 34 1992-99 cially, where there has been an 30 enormous expansion of education 26 in the last two decades, one would 25 24 0 1992 n 196 1999 expect to find sharp differences in 20- 1 the incidence of poverty across , 5 12 educational levels. 10 7 56. This is observed to be the 5 * 6 4 5 case in Figure 18, which shows 2 1 I * * the headcount ratio of poverty by None Pnmary Lower Upper Vocational & University the completed schooling of the Secondar Secondary Treacnhineg Compited school of head 15The exception is households whose heads are 60 years and older. In this group, the poverty rates among male- and female-headed households are similar. Tailn7d adSocial A,f7iluf' 19 Poverf atiel I'ztblic Policy household head. Individuals residing Percent change in real income per capita, 1996-99, by household head's in households headed by persons with schooling no or primary education are at much 12 greater risk of poverty than those in ' households headed by a secondary- or 5 post secondary-educated person. '_ 57. Not only are poverty rates -o5a -2 None Ilrirnar , Lowet Upper Vocational & UJni,Xrsity higher among the less-educated, Fig- X ocondn y SecondaUy Teacher ure 19 indicates that the less-educated e [ TraininB experienced significantly larger de- _ clines in real income per capita than u -20 19 -I the better-educated during the crisis. Completed school ofhead For instance, between 1996 and 1999, Figure 19 real income per capita fell by 13-19% among households headed by persons with lower secondary schooling or less, while it increcrsed by 5-12% among households headed by a person with upper secondary and vocational education. flouseholds headed by a university-educated person saw their real incomes per capita decline b;y a modest 2%. These results contradict the popular impression that the economic crisis of 199,-98 largely affected the educated middle-class in Thailand. 58. What the data indicate is that in Thailand, as in other countries, education beyond the pri- mary level is a powerful means of climbing out of poverty. In addition, education reduces the vulnerability of individuals to income and consumption shocks induced by external events, such as a macroeconomic crisis. Occupation of the Household Head 59. How does poverty vary across occupations? Figure 20 forcefully Headcount ratio of income-poverty, by household head's occupation, demonstrates the point that poverty is 4 15 Fann oskeos 260 4 pervasive in the agricultural sector in 3B Thailand. Farm workers and farm op- Fa- op-raXr"`l.ding .1 3s erators belong to the poorest occupa- e r 25 tions in the country, with more than 20 one-third of the persons engaged in E0-i-ca3 inav 4 20bl992 these occupations being poor in Produnand constctan- I 0[1996 1999.16 The incidence of poverty is 0CS 0 moderate among general workers and En9epn9er,terleand9 economically-inactive households Clenal,sales and serscc 4 (20% and 14%, respectively), but it is 4,ker 4 significantly smaller among other oc- PMagecnal, 12 cupational groups. Additionally, pov- Figure 20 16 Farm operators include both owner and tenant farmers, while farm workers are agricultural laborers. The occupa- tions shown in Figure 20 refer to the household head's main occupation - i.e., the occupation in which the head earned the majority of his income/earnings. Thailand Social Monitor 20 Poverty. antd Public Policyv erty rates among farm operator and farm worker households have remained stubbornly high between 1992 and 1999. This is surprising in view of the fact that Thailand's agricultural GDP grew at an average annual rate of Figure 21 1.4% during the seven years between 1992 and 1999. Compositionofthepoorbyoccupation,1992-99 E Professoioal. technical, 100_ _ =_ = manatefil 60. The extreme concentration of *Clencal, sales and 90% the Thai poor in just a few economic serce workers 80% sectors is apparent from Figure 21, 11G,. k, 70% 5 which shows the sectoral distribution *lEntrepene.. trade and 60% of the poor in each of the years be- nProductionand 50% tween 1992 and 1999. Nearly 70% of constrsctionworkers 40% the poor in Thailand in 1999 were *Economically inactive 63 52 59 55 54 drawn from the farming occupations 3Fano workers 20% (either cultivators or farm workers). Another 11% of the poweeco Farnsoperators 10% _ _ _ _ _ Another I1% of thepoor were eco- (including tenants) 0% nomically inactive population. Thus, 1992 1994 1996 1998 1999 about 80% of the poor belong to two occupations - farming and economically inactive. Ownership of Land 61. While the incidence of pov- Figure 22 erty is high among farm households, it is also the case that these house- Headcount ratio of income-poverty among farm households, holds form a rather large group in 60 bysizeofownedland, 1"2-99 Thailand. In 1999, for instance, i 1992 *1994 D1996 [n998 *1999 about 16.5 million persons belonged 50 45 46 to households headed by a person 41 44 whose main occupation was farm- 40 36 7 ing. From a policy point of view, it 1. 3 3 is therefore important to know what 30 29 3 1 types of farm households are poorer than others. 20 21 21 15 62. Since land is typically the 10 12 most important factor of production <5 rai 5-19rui 20 & more ra in agriculture, agricultural incomes Sizeofownedland - and hence the incidence of poverty - are likely to depend strongly on farm size. This is borne out by the data in Figure 22, which shows the incidence of poverty among farm households by the size of owned land."7 While it is not surprising that small- and medium-sized farmers face significantly higher rates of poverty than large farmers, it is remarkable that the incidence of poverty among small landholders in- '7The data obviously do not control for the quality of land. If corrections were made for land quality, it is likely that the relationship between size of owned land and poverty would be even stronger than shown in Figure 22, as a large fraction of land in the Northeast is hilly or otherwise of low quality. Thailand Social lonitor 21 Poilert, ann1 Puhblic' Polic y creased from 1994 to 1996, even as the Thai economy and Thai agriculture were experiencing ro- bust growth (and medium and large landholders were experiencing declines in poverty). With the onset of the economic crisis in 1997, the incidence of poverty among small landholders continued to increase into 1999, with the result that a larger proportion of small landholders were poor in 1999 than in 1992. While medium-sized farmers (those owning 5-19 rais of land) fared sorne- what better, the incidence of poverty among them was not much changed between 1992 and 1]3999 either, due primarily to 1999 being a bad agricultural year. What these results demonstrate is that small landholders have been largely excluded from the general economic growth that Thailand experienced during the 1990s, while medium landholders gained during the 1990s but lost it all in one bad year. At least two causes for these patterns can be proposed: first, the global shifts in agricultural prices that took a steep downturn in 1999, and, second, long-run agricultural procduc- tivity trends, which are taken up below. 6.3. One reason for the increase Percent change in rke yields, by region and by per capita land quintiles (adjusted for land quality), 1995-96 to 1998-99 in poverty among small and me- 30.1 27.6 26 5 dium farmers during the 1990s may 1ii be that these farmers have experi- 1 200 67 enced stagnation in agricultural 12.1 productivity over time. Indeed, a lo 65 study using data from two succes- 41 sive surveys of 1,626 agricultural _ households collected during the = ; cto6 N 1995/96 and 1998/99 crop years ' -52 finds just that.18 The study finds _ F13A that there was very uneven growth _9 -13.4 in rice yields across farm sizes and Percapita 4ustedlandquintiles Region across regions during the three years spanning the two surveys Figure 23 MERI and World Bank, 2000). The largest farms recorded an increase of 28% in rice yields during the four-year period, while the smallest farms saw their rice yields decline by 17% (Figure 23). Likewise, rice yields in the Northeast declined by 13%, while those in the Central region increased by 27%. The study was unable to identify the reasons for the large decline in rice yields among the smallest two quintiles of land holdings. Policy and Research Issues 64. The poor of Thailand are easily identified by some of their characteristics. The most im- portant among these are rural residence, geographical region of residence, education and farming. W'hile these results are not in and of themselves very surprising, what is puzzling is the persis- tently high poverty rate among small landholders. The evidence reviewed in this Monitor sug- gests that not only did this group not participate in the boom period of the early and mid-1990s, laHouseholds were sampled in more than 400 villages in 9 provinces in the North (708 households), Northeast (t42), and Central (276) regions. The same villages were sampled in both years (Mekong Environment and Resource Insti- tute and the World Bank, 2000). Tlz,-tilan7dS-Bangkok ,00 land. In 1999, for example, mean 7,000 -Central / D1\ per capita income in Bangkok was South more than four times as large as 6,000 --Northeast 000 that in the Northeastern region. 5,000 /,000 Further, as Figure 27 indicates, 4,000 /,000 these large inter-regional variations 3,000.i.. have not narrowed at all during the 3-000 decade of the 1 990s. 2,000 -,000 1,000 000 74. It is possible to decompose - :he overall income inequality in the 1990 1992 1994 1996 1998 1999- country into that attributable to differences in mean income across the regions ("between grcup") and that due to differences in incomes among persons residing within a region ("within group"). Such an exercise shows that the between-group variation accounts for a relatively small propor- tion (less than 15%) of overall income inequality. 20 Indeed, the explanatory power of the be- tween-group variation, which was in the 10-14% range from 1990 to 1998, fell sharply to only 6.5% in 1999. This means that the overwhelming share of income inequality in Thailand arises due to income variations across individuals residing within the same region - not differences in mean income across regions. In 1998, the regions accounting for the largest within-group varia- tion were 'Bangkok and Vicinity' and the Northeast.21 Indeed, nearly one-half of overall income inequality in the country could be explained by variations in interpersonal income within these two regions. 75. The implications for policy are obvious. Although reducing the income gap across re- gions will help, it will by no means eliminate overall inequality of incomes in the country. MIore important will be policies that reduce inequality across households and individuals within the Northeast and Bangkok. The sources of interpersonal income inequality in these two regions are likely to be very different. In the Northeast, differences in income across households are likely to be explained by three factors: land ownership, education, and the presence/absence of household members employed outside the region (who send remittances back to the family in the North- east). In Bangkok, education and occupation are likely to be the main determinants of income variations across individuals and households. This issue is explored in more detail below. 20 This is a common finding of similar decompositions done for other countries. 2'Data for 1998 - instead of 1999 - are used as they are more typical of the pattern observed during earlier years. These two regions account for such a large share of the overall within-group variation both because they have high levels of income inequality and because they are populous regions. ?I hailand&Social .Mlosnitor 28 Poveriv' unn Public Poliey Patterns and Sources of Inequality 76. In much the same way that overall income inequality was decomposed into that arising due to differences in mean income across regions and that due to differences in income among persons residing within a region in the previous section, it is possible to decompose inequality into between- and within-group components where the groups are differentiated by rural/urban residence and age, sex, occupation and education of the household head. This is what is at- tempted in this section in an effort to understand the sources of income inequality in Thailand.22 77. Rural/Urban Residence. As in the case of regions, differences in mean income across rural/urban areas account for about 15% of overall income inequality (with the remaining 85% accounted for by within-area differences). Approximately one-half of overall income inequality is explained by interpersonal variations in income within rural areas, reflecting the fact that these areas account for three-quarters of the national population and that they have the highest degree of within-group inequality. 78. Age and Sex of Household Head. Virtually none (0.03 - 0.4%) of the overall income inequality in the country is accounted for by differences in mean income across male- and female-headed households and across households headed by persons of different ages, suggesting that inter-household differences in the age and sex of a head are not important sources of income inequality. 79. Education of Household Head. As would be expected, education of the household head is significantly more important than his/her age and sex in explaining inequality. Differences in mean income across households headed by persons of different schooling attainment account for 19% of overall income inequality. Most of the remaining 81% of inequality that is attributable to within-group variation is due to interpersonal variations in income within two educational groups - those with primary and secondary education - reflecting the fact that they two groups account for 83% of the population and also have high levels of intra-group inequality. 80. Occupation of Household Head. Differences in mean income across households headed by persons of different occupations account for 15% of the overall inequality in incomes. The greatest degree of income inequality within occupations is found in 'entrepreneurs, trade and in- dustry' and farm operators. These two occupational groups account for approximately one-half of the overall inequality of incomes in the country. 81. What these results indicate is that each of the factors considered above - region of resi- dence, rural/urban residence, and age, sex, education and occupation of the household head - does not by itself explain more than 15-19% of the overall inequality in incomes. That is not to 22All of the results in this section refer to 1998. Although data for a most recent year - 1999 - are available, they show a very different pattern from earlier years. It is not clear whether the results for 1999 reflect the smaller size of the sample that was used by the Socioeconomic Survey during that year, or whether they reflect real changes that occurred in the characteristics of the income distribution during that crisis year. In addition, it should be noted that the decomposition analysis presented here is essentially an analysis of variance, and does not indicate a causal rela- tionship between factors, such as occupation and rural residence, and income inequality. 7/wi/aiSl(i id,)ocia/li /)oinitor 29 Poverty andi Ptb/lic Poliev say that these factors are unimportant or that, in combination with each other, they might not ac- count for a larger share of overall income inequality. But the results of the analysis do indic ate that a very large share of the overall inequality is "within-group" - differences among individuals having the same occupation or residing in the same region. 82. Certainly one reason for the failure of the above factors to explain a great deal of the tctal variance in incomes is that the groups have been defined very broadly. In other words, there are a very large number of individuals residing in the Northeast or in households headed by a pri- mary-educated person. Therefore, it is not surprising that there is considerable heterogeneity among these households, and that intra-group (within-group) variance dominates between-grcoup variance. Income Inequality by Sources of Income 83. Another way of looking at income inequality is to decompose it by the sources of in- come. Although one-half of total personal income in Thailand is derived from wages and sala- ries, the contribution of inequality in wages and salaries to overall income inequality is only 27%, since wages and salaries are distributed much more equally than other sources of income. On the other hand, even though nonfarm profits (such as income for businesses and self-employnment activities other than farming) constitute only 22% of total income, their contribution to overall income inequality is significantly greater (56%). In 1998, the inequalities in nonfarm profits, wages and salaries, and farm profits made the largest contributions (in that order) to overall in- come inequality. Sources of Income Inequality in the Northeast and in Bangkok 84. It was noted earlier that nearly one-half of the overall inequality in incomes in Thailand is attributable to variations in income across households within the two regions of the Northeast and 'Bangkok and Vicinity'. It would therefore be useful to know the main causes of income inequality in these two regions. 85. Using a statistical method- Figure 28 ology developed by Fields (1993), Decomposition of overall income inequality into its various causes, the total variance in incomes in Northeast and Bangkok, 1998 each of the two regions has been decomposed into that attributable to Demographic9factors four factors: demographic variables occupation (such as family size, household age M Northeast and sex composition, and age and Education 69 28.3 U Bangkok and Vicinity sex of the household head), occupa- tion (of the household head); educa- Rual residence tion (both of the household head Land omnership and and the best-educated adult in the tenancy status household); rural residence; land Unexplained residual 170 7 ownership and tenancy status; and Proportion of overall income inequality explained by factor Thailand Social Mefonitor 30 Povcriv andi Plublic, PolicY an unexplained residual factor. The results of the analysis are shown graphically in Figure 28. 86. Education has the largest explanatory power in accounting for inter-individual variations in income. The explanatory power of education is greater in the Northeast than in Bangkok, re- flecting the fact that education is significantly more widespread in Bangkok than in the North- east. In addition, the differing contributions of education to income inequality in the Northeast and Bangkok also reflect the fact that, in the Northeast, education is often a ticket to migrate to Bangkok and earn significantly higher wages. However, there is no such option for Bangkok residents, as Bangkok already offers the highest wages in the country. Figure 29 87. The next most important Lorenz curves for per capita income, expenditure and owned land, factor explaining income inequality rural areas only, 1998 in both regions is the demographic too characteristic of families. Differ- go ences in family size, age and sex o- / 1 composition of the household, as cfi 70 well as the age and sex of the E 60 PerfectequalI household head explain approxi- = 50 30 mately 10% and 13% of overall in- g, 40 / - come inequality in Bangkok and Y 30 income the Northeast, respectively. 20 - wed land 10 88. In the Northeast, rural/urban 0 10 20 30 40 50 60 70 80 90 1OO residence explains another 7.6% of Cwnuiative%ofpopulation overall income inequality. This factor is, of course, not relevant in Bangkok, as the 'Bangkok and Vicinity' region is entirely urban (and suburban). 89. What is surprising is the almost negligible contribution of land ownership to overall in- come inequality in the Northeast. This does not reflect the fact that land is distributed equally in the Northeast; indeed, as Figure 29 shows, the distribution of land is significantly more unequal than that of income or consumption expenditure. 90. Instead, the results reflect the fact that, even in the Northeast, farming is not the only oc- cupation, and land is not the only source of income. Indeed, only one-third of individuals in the Northeast belong to households in which the main occupation of the head is farming (including farm work). Furthermore, as Figure 30 shows, farm operators on average have the lowest in- comes of all occupations in the Northeast. Entrepreneurs, trade and industry persons, who constitute 19% of the population, and managers, professionals and technical workers, who have a population share of 11%, enjoy per capita incomes that are about three times as large as the in- comes of farmers and farm workers. Thus, while land ownership may be an important source of inequality of incomes amongfarm households, it is unlikely to explain a great deal of overall in- come inequality as some of the richest individuals in the Northeast own no land at all.23 23This discussion does not in any way imply that land is not an important source of income and that land-ownership is not associated with poverty. aihland SCocial Mlonitor 31 Poveriv untl Puiblic, Policv Figure 30 91. Finally, the decomposition Mean household income per capita and share in total population, by results show that a very large pro- major occupation, Northeastern region portion of overall income inequality ,000 32.4 3- in both regions - one half or more - ; 6,000 simply cannot be explained by any - 5 Mean incomepercapita p~~~~ -,00 \ % shiile in population vL-25 Zo of the factors considered here. This s in18 p9p is a result that is commonly ob- 154 .2) 3,000 3 tained for other countries as well. It 710.9 reflects the fact that inequality of E 2000- income arises due to the unequal 1000 4 distribution of factors and endow- ments that are not easily observed °. d2 in survey data, such as inherited E c 2 2 assets other than land, innate abil- = ity, 'social capital', and personal and family connections. In addition, of course, random luck often plays an important role in ex- plaining variations in economic success across individuals. Changes in Ineguality Between 1998 and 1999 92. As noted earlier, the period 1998-99 was one associated with a sharp reversal of the de- cline in inequality that had begun in 1992. One reason for this increase was that the economic crisis had a disproportionately negative impact on the incomes and livelihoods of the poorer sec- tions of Thai society. The clearest effect of this can be seen in the changes in real income per capita during 1998-99 of households headed by persons with differing educational attainments. 93. As would be expected, higher levels of education of the household head are associated with higher levels of household income per capita. Individuals residing in households where the head has tertiary schooling have more than five times the income of individuals in households where the head has no formal education. Figure 31 shows that the effects of the crisis wAere highly regressive in that households that were the poorest to begin with in 1998 (i.e., those headed by a person with no schooling or primary schooling) experienced the sharpest drops in real income, while those that were relatively better-off (i.e., those headed by post-secondary edu- cated persons) actually experienced an increase in real income between the two years. 77iailhadnd Social,11Afonuior 32 Poiveriv und Public Policv 94. This highlights the special Mean real household income per capita in 1998 and percent real change nature of education as a human capi- in per capita income, 1998-99, by schooling of household head tal investment. Education does not '0,°° 17.5 20 merely increase the average earnings 9,000 Mean real income per capita 13 15 of an individual over his or her life- > 1,000 - change, 1998-99 / lo a7,000- time, but it also reduces his or her . 6,0/- vulnerability to income fluctuations. 5,000. ...... 0 Even those better-educated individu- 2 40006 als in Thailand who may have lost c 3000 their jobs during the economic crisis, 2,000 -00 9 such as individuals working in the 1,000 --5 finance sector, were able to find 0 i -20 other jobs and sources of income, None Primary Lower Upper Vocational University seondary secondary and technical and maintain their real standard of Figure 31 Completed schooling ofhoasehold head living. Indeed, the data in Figure 31 indicate that individuals with upper secondary education and vocational and technical qualifica- tions actually improved their standard of living during 1998-99, in contrast to those with lower secondary or lower levels of schooling, who suffered real income declines. 95. The same pattern is ob- Figure 32 served with respect to age of the Mean real household income per capita in 1998 and percent real change household head. Individuals resid- in per capita income, 1998-99, by age of household head . ing in households with older heads 3,000 104 to generally have higher income per 2A800 Mean real income per capita-8 capita than those in households .N - [=Mcange, e 199-99 headed by younger heads. But, in \ 2,6/0 general, households with older 4 o heads fared better between 1998 2 - and 1999 than those with younger / heads (Figure 32). The age effect 22 -2 reflects the importance of seniority, -2 especially in the Thai context. 2,000 4 Younger workers were much more <20 21-30 31-40 41-50 51-60 >60 likely to have lost their jobs during Age ofhouseholdhead ears) the economic crisis than older workers.24 Changes in the Distribution of Education 96. Given that education has the largest explanatory power in accounting for income inequal- ity and given its powerful role in reducing poverty, a natural question is what has been happening to the distribution of education in the Thai population over time. If access to schooling has been improving rapidly for low-income groups, future prospects for an improvement in the distribu- 24This was documented extensively in the Social Monitor IV: The Thai Crisis and Workers. 7'/i hilan?d ,Socia l Afositor 33 Poverliy and Public Policy tion of income would look bright.25 On the other hand, a worsening of the distribution of school- ing opportunities in the population would not bode well for the evolution of income distribution in the future. 97. Data from the various Socio- Distribution of enrolled students at theprimary and lower secondary 97.n Data furomysshowthat thervariousoclevel, by real per capita income quintile, 1992-99 economic Surveys show that there 100% . _ has been an enormous expansion of CRichest 90% 17 education in Thailand, and that the 80% poor quintiles have increased their *Fourth 70% share of lower secondary students impressively during the decade of UThird 40% 23 23 the 1990s (Figure 33). For example, 30% 22 22 1 while only 12% of all lower- 20% 16 secondary students in Thailand were [lSecond 10% 26 27 27 19 22 drawn from the poorest quintile in 0% _ _ l 199 ; 1992, as many as 22% were in 1999. ilPoorest Primacy Loer sewondaTy (No large changes in the share of Figure 33 primary students are observed for .9 any quintile, because all quintiles had already reached universal primary enrollment by 1992.) Correspondingly, the share of the richest quintile among lower-secondary students fell from 24% to 14%. 98. Figure 34 suggests that the Distribution of enrolled students, by level and by real per capita income poorest quintile has increased its quintile, 1992-99 representation among upper- ERichest 100% secondary students as well - from about 10% in 1992 to 15% in EFourth 4S 1999. This number should further s 60% increase in the coming years, as the number of years of compulsory *Third 0 40% schooling has been increased by 20% the government just recently from [ Second 0% 9 to I I years. 1992 1996 1 1999 ]992 1996 1999 1992 1996 1999y 0 Poorest Upper secondary Vocabional & technical University 99. The share of the poorest traiing quintile among vocational students has also increased impressively in Figure 34 relative terms - from a mere 2% in 1992 to 8.4% in 1999. The only schooling level where the poorest quintile has not managed to increase its representation appreciably is university educa- tion. The percentage of university students drawn from the poorest quintile barely increased clur- ing the seven years, remaining at a mere 0.9% in 1999. The domination of university education by the top quintiles is observed in the fact that more than 90% of all university students in the 250f course, changes in the distribution of earnings and income will depend not only on changes in the distribution of schooling in the population but also on changes in the pecuniary returns to different levels of schooling. Tliailan7d Socical Akonilor 34 Povieriv adnt Ptihlic Policy country were drawn from the richest two quintiles in 1999 - down only slightly from 96% in 1992. 100. Undoubtedly, an important reason for the low representation of the poorest quintile in university education is that the entry of this group into lower- and upper-secondary schools is simply too recent for it to have a cohort of secondary-completed students that are eligible for university admission. As more and more students from the poorest quintile enter and graduate from secondary schools, one would expect the pool of poorest students in university education to increase. However, this is by no means an automatic process. The total (both direct and oppor- tunity) cost of university education in Thailand, as in other countries, is large, and this restricts the access of poor students, howsoever eligible they might be, to university education. It would therefore be important for public policy to proactively target educational assistance programs, such as student loan and scholarship schemes, to students from the poorest backgrounds. How- ever, as is discussed later in chapter 6, this does not appear to be the case. The benefits of gov- ernment scholarship and student loan schemes are derived disproportionately by the upper in- come quintiles. Research and Policy Issues 101. While regional inequalities - reflecting the Bangkok-centric bias in economic growth - are an important source of income inequality in Thailand, the evidence suggests that within- region variations in household income are even more important in explaining overall inequality. Education is one variable that accounts for a significant source of this intra-regional, interper- sonal inequality. This suggests that equality of opportunity in education will be an important pol- icy tool to reduce income inequality in Thailand (under the assumption that the returns to educa- tion do not change over time). The evidence does indicate a substantial improvement in the dis- tribution of primary and secondary education during the last decade. However, higher (college) education is still very unequally distributed, with the poor having almost no representation in in- stitutions of higher education. While this is also likely to change over time, as a cohort of poor students graduates from secondary schools and becomes eligible to enter universities, policy will need to play an important role in order to make this happen. The high cost of university educa- tion typically restricts the access of poor students to higher education. The government therefore has an important role in subsidizing the cost of higher education for students from the poorest backgrounds. However, as discussed later in chapter 6, the benefits of the limited government educational assistance programs in Thailand do not appear to be well targeted to the poorest stu- dents; indeed, the overwhelming majority of the beneficiaries of these programs are students from the richest two quintiles. 102. The evidence from the SES also suggests that, after several years of improvement in the early and mid- 1 990s, income inequality increased sharply in the aftermnath of the crisis. One rea- son for this was that the crisis had a stronger negative impact on the earnings and incomes of less-educated and younger workers, who typically are poorer than better-educated and older workers. As more recent post-crisis data become available, it would be important to explore whether the increase in inequality in 1999 was a transitory (crisis-related) event or whether the country is once again entering a period of rising income inequality. ihailandS1Social A.Ionitor 35 Po tverty an'h )j'tblic P'olicvl Chapter 4. Strategic Policy Issues in Poverty and Inequality 103. Chapter 4 of this report turns to the strategic issues confronting Thai policy mak- ers as they build the policy foundations for a resumption of growth and the reduction af poverty. Traditionally in Thailand, anti poverty programs were associated with transfers to the indigent, the elderly, and disabled. Rapid growth and policies promoting growthi were seen as more than adequate to deliver substantial income gains for all Thais, includ- ing the poor. In recent years, these views have undergone some refinement and development, as Thai debates on public policy have intensified: * Growth rates that were once the highest in the world are now expected to moderate over the medium term, thus focusing attention on public policies in ad- dressing more directly the problem of poverty; * The crisis impacts demonstrated that private, informal safety nets were effec- tive, but not adequate to cushion the effects of the economic contraction, particu- larly on the poor; * Highly unequal income distribution, long masked by the benefits of rapid growth, has emerged as a policy issue; - Poverty among certain sub-groups and in certain areas appears to be chronic and resistant to the benefits of growth, posing a possible "structural" dimension to poverty. 104. The strategic issues taken up in Chapter 4 are cross sectoral and thematic: self ie- liance and informal safety nets; chronic, structural poverty; causes of poverty and the case of the Northeast, natural resource degradation and poverty; gender and poverty; and the role of growth vs. income distribution in provincial and national poverty outcomes. The list is far from complete. For example, taxation policy and its effects on poverty are not addressed, nor are trade policies, both of which might be considered strategic issues. Poverty and Self Reliance 105. The crisis clearly imposed hardships on poor, marginal, vulnerable families, be- fore Government or community programs could reach them. Incomes and wages fell, jobs were lost, and unemployment rates rose sharply. Social problems also increased, with higher rates of crime, drug use and arrests and suicides. Thai children seemed to have suffered the most - the number of infants abandoned after birth and children placed in orphanages increased. 106. Despite these worrisome signs, there were also clear signs emerging from the household level that families took concrete steps to cushion the effects of the crisis and to protect their social assets. This pattern of self-reliance and mutual assistance can be seen in the evidence on income transfers and consumption shifts at the household level. As Thai policy makers address demands for more official safety net programs, an important consideration is the admirable and socially beneficial role of such voluntary family cop- ing strategies. Thailand Sociul AlMonilor 36 P0olerfv andi7 Pib/lic Policl 107. One way in which the poor can cope with adverse circumstances is through greater reliance on income transfers from friends, relatives and the government. In the case of Thailand, most of the transfers are from relatives, typically those members of the family who have migrated to the urban areas (typically, Bangkok) in search of better- paying jobs. However, the economic crisis of 1997 was unusual in that it first affected Bangkok, and this resulted in a large number of migrant workers in the construction sec- tor in Bangkok being laid off. As a result, the ability of these workers to send remit- tances to their families in the rural areas, typically the Northeast, was curtailed. 108. There are two observations The volume of income transfers in relation to total income, that can be made about transfers by real per capita income quintile, 1996-99 from Figure 35, which shows 12- 17 transfer income as a percentage of 11 1996 r1998 01999 total income by real income quin- 10 98 tiles for 1996, 1998 and 1999. E 89 9 3 First, transfers are larger in rela- tion to total income for the lpoorest three quintiles relative to the rich- 7 est two quintiles. Second, the evi- 6 5 l * dence also indicates that, while the 5 poorest three quintiles increased 4 their reliance on transfers between Poorest Second Third Fourth Richest 1996 and 1999, the richest two Real per capita income quintile quintiles experienced a decline in Figure 35 the proportion of total income derived from transfers. 109. Another means of exam- Incidence of income poverty in the absence of transfers, 1996-99 ining the importance of transfers to the poor, especially during the 25 O3Actual incidence ofincome poverty 22.5 crisis, is to calculate what the C Incidence ofincome povety in the absence ofremittances and * 20 ~~~~~~~~~~~assistance incidence of income poverty 20 18.0 would have been in the absence 16.6 15.9 26 1 of transfers. In all three years 13.0 - 1996, 1998 and 1999 - trans- . 11.4 fers played a very important role 10 in keeping poverty significantly below what it might have other- 5 wise been (Figure 36). How- ever, the difference between ac- 0 tual poverty and the poverty that 1996 1998 1999 might have been present in the Figure 36 26Actually, the counterfactual of what incomes would have been in the absence of transfers cannot simply be obtained by subtracting transfers from income, since household behavioral responses intervene. For example, it is likely that in the absence of transfers, households might exploit other sources of supplement- ing their incomes, in which case the numbers in Figure 36 overstate the effect of transfers in reducing pov- erty. Thailand tSociaAl onitor 37 Poatertv ucl P'Iublic Policy absence of transfers is much greater for 1999 than for the earlier two years (6.6 versus :5 percentage points). Thus, transfers are an important coping mechanism of the poor in ordinary times, and even more so during periods of crisis. Thus, despite a substantial re- duction in wages, families continued to support one another, pulling together to help each other cushion hardships and relying on one another. 110. Another manner in Expenditure shares on selected items of expenditure by the poorest 20% which the poor adjust to nega- of households, 1996 and 1999 tive income shocks is to e 20 change their consumption pat- 0 16 a tems. Families can and do t 14 * make conscious decisions to , 12 m 1996 *1999 E 10 cut down on those items that U 8 are of less importance to the ° 6 overall well-being of the fam- 4 ily. Figure 37, which shows $ 0 the proportion of household ld S, expenditure spent on selected .4 items of expenditure in 1996 and 1999,2 suggests that F some of these adjustments did Figure 37 take place in Thailand. The poor cut back their share of expenditure on tobacco and al- cohol. They also appear to have switched from expensive sources of calories, such as meat and poultry, to cheaper sources, such as grain and cereal products.28 Figure 37 also shows a shift in consumption away from fruits and nuts, which typically are expensive, toward vegetables that cost less. 111. More disconcerting is the fact that the share of expenditure on medical visits and medicines were cut significantly. However, this does not necessarily mean that health- care visits fell. Other evidence suggests that the number of health-care visits were not changed, but that households shifted from more expensive private health care to public health care providers (World Bank, 1999). An expansion of the public assistance pro- grams - in particular, the low-income card and the voluntary health insurance card -- could account for this. It is hard to validate these hypotheses with the SES data. 112. Surprisingly, the data suggest that the share of expenditure on education increased significantly (albeit from a small base) - from 1.6 to 1.9 percent. It is not clear why this would have happened, although evidence from other countries does suggest that school- ing enrollments are often counter-cyclical with respect to the economy - i.e., the demand for schooling rises during times of recession since the opportunity cost of attending 27Consumption expenditures are compared only across 1996 and 1999 for reasons of data comparability. Expenditures on food are typically obtained in the SES from a 'short' questionnaire that asks respondent:i about expenditures incurred on 15 major food categories. In 1998, however, food expenditure data were collected on 140 detailed food items. Hence food expenditures are not measured in a comparable way across the 1996 and 1998 surveys. 28This need not necessarily be a negative outcome. For example, it is possible for the shift from more eX- pensive to cheaper sources of calories to actually improve nutritional or health outcomes. ThailandS~ocial i,Ionitor 38 P0overli and] Pliblic PIolici. school is lower (because of lower wages and higher rates of unemployment in the labor market). Structural and Chronic Poverty 113. Structural poverty is often re- ferred to as poverty that is persistent Box 6: The Ultra Poor over time and not easily amenable to eradication by the usual instrument of A study conducted by a team of research- economic growth. Indeed, even direct ers led by Professor Medhi Krongkaew used an policy interventions sometimes are un- innovative technique of asking village leaders to able to reach and to benefit the structur- identify the five poorest households in their sam- ally poor. Structural or chronic poverty pled villages. These households, who were labeled ally poor. ~~~~~~~~as the 'ultra poor' by the researchers, were inter- may be the result of many different fac- viewed about their socioeconomic characteristics tors, including social exclusion (due to and their methods of coping with abject poverty. ethnic identity, class or caste), geo- The study found that abject poverty was associated graphical isolation (e.g., residence in with large household size, a large ratio of depend- remote mountainous regions that are dif- ents to earners, heads with little or no schooling, and lack of ownership of land. Even though some of ficult to access), and physical location the abject households had little or no land to work, (e.g., residence in arid regions having they were too poor to move out of the village to very low levels of soil fertility or low seek other gainful employment. Other correlates of rainfall). In other cases, a 'culture' of abject poverty were widows as household heads, the psoverty may have evolved among cer- critical burden of having to look after a chronically tain pover aty on may ups-perhaps in re- ill or disabled person in the family, and the failure tain population groups - perhaps in re- to receive any benefits from a public assistance sponse to their being poor for so long - scheme. The latter finding is particularly important that makes them resist government poli- as it suggests that public social assistance schemes cies that would lift them out of poverty. do not reach the ultra or abject poor. Whatever its causes, chronic poverty is a Source: Krongkaew (2001). considerably more difficult problem to address with the standard policy pre- scriptions and tools. 114. In contrast to chronic poverty, transitory poverty refers to those individuals or groups who move in and out of poverty, largely as a result of income shocks in the form of natural disasters, catastrophic illness, macroeconomic recessions, or a collapse in, say, agricultural commodity prices. Transitory poverty may also arise due to a lack of access to assets (e.g., land), opportunities (e.g., schooling and employment), and markets (e.g., credit, product and labor markets). If access to these factors is enabled, the transitorily poor, at least in principle, can manage to lift themselves out of poverty. 115. It is possible to distinguish the transitorily-poor from the chronically-poor with longitudinal survey data that tracks the same households and individuals over a number of years. However, in the absence of such data, it is very difficult, if not impossible, to separate out the chronically- from the transitorily-poor. For Thailand, there is no nation- ally-representative, longitudinal household survey data available, and this makes it diffi- cult to estimate the incidence of structural or chronic poverty. ThailandSocial Nfoilor 39 Po ierw and Ptublic Po)licV 116. Some indications of chronic or structural poverty can be obtained by examining' temporal changes in poverty incidence for different population subgroups defined on the basis of characteristics that are not likely to change much from year to year. These would include gender, education (of adults), region of residence, and land ownership. This analysis has already been done and presented in Chapter 2. There, it was noted that cer* tain groups, such as farm workers and farm operators (in particular, small and medium landholders), large households (viz., those with 6 or more members), households with a large number of dependents relative to earners, and households headed by individuals with primary or less education, have had stubbornly high rates of poverty over a long pe- riod. Indeed, poverty for some groups, such as small landholders, has increased even in absolute terms during the decade of the 1990s. All of this evidence suggests that a sig- nificant portion of the poverty among these groups is likely to be structural. 117. Likewise, the ranking of regions by poverty incidence has remained remarkably stable over time. The Northeast was the poorest region in 1988, and it continues to be the poorest region today. Of course, poverty levels have fallen in absolute terms in the Northeast, but they have fallen far more slowly than in other regions. Again, this sug.- gests a strong structural element to poverty in the Northeast. 118. Perhaps, the strongest evidence of structural or chronic poverty is seen in the pro - vincial data on poverty incidence. A ranking of provinces by poverty incidence in each of the four years - 1994, 1996, 1998 and 1999 - shows that, of the poorest 17 provinces in Thailand in 1994, as many as 8 (Mae Hong Son, Narathiwat, Kalasin, Sakhon Nakhon, Yasothon, Nongkhai, Nakhon Phanom and Sisaket) remained in the poorest-17 group in every one of the four years. Another 4 provinces (Roi Et, Buriram, Pattani, and Nan) ranked among the poorest 17 provinces in three of the four years, while 3 province, (Loei, Mukdahan, Chaiyaphum) ranked among the poorest 17 provinces in two of the four years. Only two provinces (Krabi and Ranong) that were among the poorest 17 in 1994 did not rank among the poorest 17 in any of the other years. 119. Figure 38, which Income-poverty incidence in selected provinces as a ratio of national shows the incidence of in- poverty incidence, 1994-99 come-poverty in four of 3 5 m these provinces in relation 32 1994 t 1996 C11998 1999 to the national poverty in- 8 1 3.0 cidence, indicates that these 2 28 2.8 2.8 provinces, which were * 26 2.6 among the poorest prov- _ 2.5 2.4 23 25 25 inces in the country in . * 1994, have performed 2.0 worse than the national av- ; 20 18 erage in bringing their pov- erty rates down over time. 15 Even before the onset of the Narathiwat Sakon Nakhon Sisaket Nakhon Phanom economic crisis in 1997 Figure 38 Thailand Social ,1ontitor 40 Poi,erwl andi Puiblic Polic, (i.e., from 1994 to 1996), all of these provinces had experienced an increase in the ratio of their poverty incidence to the national incidence of poverty. This is indicative of a high degree of structural poverty among some of the poorest provinces in the country - especially those in the Northeast. Poverty and Environmental Resource Constraints 120. The linkages between Box 7: Environmental Capital poverty and the environment are complex and not easily defined. "...I think people claim that they are poorer because growth does Access to natural resources - i.e. destroy the environment. As people refer to me as a Buddhist water resources, land and soil, the economist, I would like to quote P.A. Payutto (a revered monk). forest and fisheries - is critical to Economists see the merit of production; however, to Buddhism, production does have a destruction aspect. Production is the use the everyday functioning of rural of resources to make outputs for consumption or the next produc- households. For some poor tion process. In this light, resources have been converted from households, limited or low quality the useable to non-useable resources. It is not enough to look at natural resources endowments growth alone. Environment capital should be taken into ac- trap them in low productivity live- count..." lihoods. For others, their poverty Source: Participant comments at a TDRI Poverty Workshop, De- compels them to over-exploit the cember 22, 2000. natural resources they have, caus- ing a steady erosion in their natural capital base and in their incomes from it. And in many instances, the poor are helpless bystanders as other more powerful interests expro- priate their natural resources, leaving them with degraded and less productive forests, fisheries and land. Thus in many ways, the deterioration and over-exploitation of natural resources can have negative impacts on the livelihoods (opportunities) and security of poor people. 121. Extensive research has also illustrated that environmental problems can result in serious damage to the health of people in developing nations. Approximately 19 percent of the illness and death in the developing world can be attributed to environmental factors - access to safe water and sanitation, vector-borne diseases such as malaria, air pollution, etc. Furthermore, there is evidence that the poor tend to suffer disproportionately from exposure to such environmental hazards. 122. Therefore, addressing the problems raised by environmental resource constraints can help increase the incomes of the poor, improve their health outcomes, and reduce their vulnerability to shocks. 123. In Thailand, rapid development over the last 30 years has been accompanied by significant pollution and degradation of natural resources in rural areas. Domestic sew- age, industrial effluents, and agricultural run-off have contributed to increasing pollution of coastal, surface, and ground water. Forest cover has decreased drastically from 53 percent in 1961 to 28 percent in 1989, when a logging ban was enacted, to 25 percent in 1998. Deforestation is particularly serious in the Northeast, where forest cover has de- creased by nearly 60 percent between 1985 and 1995. Inappropriate agricultural prac- tices and encroachment, fueled by the need to provide income, food and shelter for an Thailand Social Mo nitor 41 Po verl, and i 'iblic Polici, increasing population, are among the main causes of land degradation. The latter in turn affects agricultural productivity. The Government estimates that soil erosion affects be- tween 17 and 21 million hectares of land impacting both on and off-farm activities, an(i this problem is more pronounced in the Northeast. 124. There is an increasing awareness and demand for environmental protection acros, a broad section of society. Civil society representatives have ixnderscored the need to ad- dress environmental problems, given the clear links with poverty. Consensus is emerging among the Government, private sector, and civil society on the need for increased atten- tion to preserving the environment through better management of natural resources, broader public participation, and effective enforcement of regulations for Thailand. In- deed, the Ninth National Economic and Social Development Plan (9th Plan), for 2002- 2006 explicitly emphasizes that sound natural resources conservation practices are impor- tant for building a strong social foundation as well as sustainable poverty reduction. Box 8: The Nexus Between the Environment and Poverty For many years, natural resources were used as inputs in national development to create higher overall inco.me and improve the living standards of Thai people. During these years, the Thai economy experienced rapid growth despite the ineffective management of natural resources. However, with no line draw on the appropriate amount of natlral re- sources that should be used, resources that once were rich and fertile started to decline.... The rise of natural resource and environmental problems has had a great impact on the level of poverty in Thai- land. A decline in the richness of natural resources and an unbalanced ecological environment has resulted in farmers facing tremendous loss of profits - their outputs cannot cover their production costs, which means farmers do not have enough income to spend on their everyday needs. Consequently, some farmers have moved to the urban area seeking employment in industry - abandoning their work on the farms. An increasing number of labourers coming frcm the countryside has resulted in the creation of slums in the urban areas, where the people are faced with a low standard of living and instability. The demand for limited natural resources has resulted in increasing debates about the right to use such resources and its allocation in Thai society - this conflict is waged between government and Thai citizens, as well as among the citizen themselves. This is a structural problem that requires a comprehensive strategy in order to address the problems. POTENTIAL STRA TEGIES To RESOLVE THE PROBLEM Preservation of natural resources and environment, and its management: This could be done by supporting cornmunity involvement in solving problems; supporting a renewal program for areas that have suffered the most degradation of natural resources i.e. forests and marine resources; as well as providing opportunity and increasing local community's capacity to be involved in resources preservation - ensuring a concrete way of managing the environment. Improve management system at public level: This could be done by developing a mechanism and strategy to prevent conflict in the society that involves the poor; supporting cooperation and agreement between government, private sec- tor, the people, and community institutions in order to solve problems peacefully; and supporting conflict-prevention mechanisms to provide participants with accurate information and establish feedback center to hear each voice. Reconstruction of the natural resource and environment management system: This could lead to sustainable develop- ment and the reduction of violent conflicts on the use of natural resources. This could be done by improving resources and environment management mechanism in order to support the poor's livelihood; supporting the establishment of a fund for preservation and restoration of natural resources and environment; supporting participation by local arid com- munity in managing the resources and environment; as well as developing guidelines on the use of resources, and city plan for environment and living standard. Source: NESDB Thailand Social AlMonilor 42 J)'mverlv and Ipthlic Poilictv 125. This "nexus" of poverty and natural resource degradation is an important area for further analytical work and policy development. The Thailand Development Research Institute has commissioned a study on poverty and natural resource conflicts in Thai- land's northern region to better understand causes and remedies. More work needs to be done on how natural resource constraints affect the persistence of poverty in the northeast of Thailand, where both poverty and natural resource problems are concentrated. Whether restoration of natural resources can reduce poverty while increasing the stock of environmental capital is an important empirical question. This "nexus" is a relatively new domain for environmental science and for poverty analysis. It requires urgent atten- tion in Thailand. Gender and Poverty 126. Gender issues have become an increasingly important aspect in the debate on de- velopment. Policy researchers and development practitioners have begun building a body of evidence and experience that links attention to gender in policies and projects to equi- table, efficient, and sustainable outcomes in development. While quantitative data may be mixed on the link between poverty and gender, there is clear evidence that suggests that societies that discriminate on the basis of gender tend to experience more poverty, slower economic growth, and a lower quality of life than societies in which gender ine- quality is less pronounced. In all countries, but particularly in the poorest, giving women and men the same rights - allowir.g them equal access to education, jobs, property and credit, and fostering their participation in public life - produces positive outcomes. These outcomes include decreased child mortality, improved public health, and a strengthening of overall economic growth. 127. Attempts to estimate the number of women worldwide living in poverty has gen- erated a considerable amount of debate, and no consensus. The main stumbling block is the lack of an acceptable indicator that can be compared for men and women. The litera- ture on gender has focused on non-consumption indicators such as vulnerability, empow- erment and access to health, education and land. Poverty analysis however tends to focus on differences in welfare between male and female-headed households. The argument is that households headed by women, facing more constraints, will tend to be poorer than those headed by men. However, the evidence linking poverty with headship is mixed. In fact, in the case of Thailand, as earlier analysis has indicated, the incidence of poverty among female-headed households is typically lower than in male-headed households, ex- cept when the female head is 60 years and older. The probable explanation for the lower poverty incidence among young female-headed households is that the latter are house- holds where the adult male has migrated to an urban area to seek employment and better wages, and is sending remittances back home to a young wife who is temporarily taking his place as family head. Thail/and .Sociul Nni/tor' 43 Po)7ertv andl I'tibliw Policev 128. Access to Resources and Opportunities. Research has shown that there is a strong relationship between poverty and gender disparities in basic education and health that are critical to the ability of both men and women to take advantage of opportunities that will enable them to attain a basic quality of life. 129. Over the last three decades, Thailand, has achieved remarkable progress in its so- cial indicators. The gender gaps have narrowed, especially in health and education. En- rollment of women has increased at all levels, and more women than men are enrolled in higher education. At the primary level Thailand has close to full gross school enrollment for both girls (90%) and boys (93%). In private and public universities 51% of students are female and 49% male, and in vocational and technical educational programs 37% of students are female and 63% male. Adult illiteracy has decreased drastically from 27.3% for women and 12.4% for men in 1970 to 7.2% for women and 3.3% for men in 1997. While life expectancy for women (72 years) is higher than the regional average, that of' Thai men is lower (66 years), reflecting emerging health concerns specific to men. Infant mortality declined from 73 per 1,000 live births in 1970 to 26.1 in 1995-96. Maternal mortality decreased from 200 per 100,000 live births in 1990 to 44 by 1997. Thus, in terms of key indicators related to well-being and better quality of life Thai women have witnessed considerable improvements illustrating improved access to key social services. 130. While the disparities between men and women illustrate examples of discrimina- tion against women, they do not necessarily provide causality between poverty and the deprivations in these areas. Nevertheless, there are areas for definite improvement. 131. The Social Monitor IV found that the adverse effects of the crisis were larger for males than for females.29 Employment, wages and aggregate wage labor earnings de- clined somewhat more for males than females, and both unemployment and underem- ployment increased more for males than females. However, a much larger proportion of female workers than male workers earn less than the minimum wage. As in most other countries, wages for men are 15-20% greater than those for women in Thailand. It is in- teresting to note that during the peak of the recent economic crisis, the wage gap betweer men and women narrowed to about 14% during the crisis from approximately 18% in the: pre-crisis period. However, by the third quarter of 1999, with recovery well under way., the male-female gap had increased to 19% -- illustrating the continued structural prob- lems in the labor market that prevent women from earning more. 132. The high concentration of women workers in semi-skilled positions in the manu-* facturing industry, and the significant proportion of women employed in construction, mean that women are increasingly exposed to hazardous working conditions - without adequate occupational health and safety measures in place. 133. The National Statistical Office conducted a special survey of home-workers in 1999, who are defined as individuals performing work outside the employer's work site and who are paid by the employer for this work. The majority of home-workers arec women - 80 percent of those surveyed. There is speculation that the number of home- 29 Thai Workers and the Crisis, July 2000. This section draws heavily from that report. Thailand Social MoInitor 44 Poiverfy andi Public Policy workers expanded during the crisis, and that they may continue to rise. Because they are outside the workplace there is concern that these people, many of whom are women and are not protected by labor laws will be subject to substandard working conditions and pay. In fact late payments were a particularly widespread problem faced by home- workers. . There is however anecdotal evidence that women in such informal networks are becoming stronger and better able to voice their concerns. As a result, government agencies are beginning to pay more attention to the working conditions of women in the informal sector. 134. In the formal credit market, women often face difficulties in applying for loans in their own name, as banking regulations often require the head of household (assumed to be the man) to make the loan agreement. There are some exceptions, credit programs administered by the Community Organization Development Institute (see chapter 5 for more information on this Institute) and the Bank for the Poor administered by the Gov- ernment Savings Bank do not require borrowers to be the "heads of household." Thus poor women can gain access to credit under these initiatives. 135. Managing Risk and Insecurity. Women are falling victim to AIDS at a faster rate than men. From 1984 until 1998 they represented only one quarter of the total number of AIDS patients. Today they constitute one-third of the total number of AIDS patients. HIV prevalence among pregnant women continues to rise, from 1.74% in 1997 to 2.02 in 1999. In the absence of any intervention, an estimated 4,000-5,000 HIV-positive children will be born annually to women with HIV/AIDs. There is some anecdotal evidence that female and male AIDS patients tend to be concentrated in the lower income groups but this has not been analyzed nationally. 136. The exact number of women working as commercial sex workers is unknown and estimates vary significantly. The Office of the National Commission on Women's Affairs estimates that about 200,000 women are commercial sex workers, of these up to 20% are under the age of 18. The economic benefits gained from entering the commercial sex trade can be enticing to poor women and children. Villages in the North, in particular hill-tribe groups, and the Northeast have been susceptible to "agencies" willing to pay the equivalent of a year's salary in return for their children's services (UNICEF, 1997). An- ecdotal evidence suggests that the trafficking of women continues to be a problem in the North and Northeast. 137. Research has shown that domestic violence disables women, leads to a loss of in- come, and increases what society spends on healthcare. Since the onset of the economic crisis over 2 years ago, when many Thais lost their jobs or had their wages severely re- duced as a result, there is anecdotal evidence that the number of women as well as chil- dren who are abused at home and in communities has increased. 138. More research is needed to understand the impact on poor women of AIDS, the commercial sex trade and domestic violence. T7hailand Social A foniior 45 Povern,i and Public Policv 139. Inequality in Voice and Measures to Empower Women. Representation of men and of women in both national and local politics is far from equal, and increasing women's political representation remains one of the greatest challenges to gender equality in the country. Women hold just 8% of government positions-and only 1.5% at the Io- cal level. Few women are seated in the Parliament that consists of 367 (93.9%) male ancd 24 (6.1%) female MPs. 140. The Prime Minister Office's and the National Commission of Women Affairs have issued a new regulation that requires the appointment of a Chief Gender Executive Officer (CGEO) in all government departments in an effort to ensure that gender issues are taken into consideration in allocation of the government budget and preparation of projects. In September 2000, the Office of the Civil Service Commission issued guide- lines to promote gender equality in civil service administration. Currently women hold approximately 22 percent of the higher level positions in the civil service. 141. The 1997 Constitution grants equal rights to both men and women. Building on this framework, the empowerment of Thai women could be supported by increasing their voice at the national and community level. In some countries this has been done by re- serving a percentage of positions on party lists for women. 142. As in most areas of social development, the situation in Thailand yields mixed results. Thailand has done a remarkable job in increasing access to education and health services to women, but more needs to be done to increase the voice of women and reduce their sense of vulnerability and insecurity. The importance of bringing a gender and pov- erty perspective to policy analysis and design is still not widely understood in Govern- ment. While many are sympathetic, gender is still commonly viewed as a political issue and, something not central to country policy-making or to development effectiveness. More attention needs to be paid to achieving gender equity in order to advance the goal of poverty reduction. Correlates and Causes of Poverty 143. As noted earlier, poverty can Box 9: "Causes" of Poverty have many causes - economic, demo- graphic, social and cultural. But one In a lot of research there exists confusion between the of the single most important reasons characteristics of the poor and the roots of poverty. We say that the poor live in rural areas, mostly in the for poverty IS the lack of income- Northeastern region. We indicate that the head of the generating assets. These include both family has low education and may be divorced - thus a physical assets, such as land and capi- single parent. The majority of the poor suffer from tal, and human capital, such as educa- health problems. Then, the conclusion is made that tion. Education is a particularly im- these characteristics are the causes of poverty. Actu- s ally, there is only a relationship or correlation between portant asset, the lack of which tends the two, but further study is needed to find out the to be self-perpetuating. The poor genuine causes of poverty. It is highly dangerous to have low incomes and low productiv- conclude those characteristics are causes and then jump ity because they lack a good educa- into policy formulation. tion, but they are also less likely to Source: Participant comments at a TDRI Poverty Workshop, December 22, 2000. Thailand Social M11onitor 46 P(1) eriv andt Public PoliiCk' invest in the schooling and education of their children because they cannot afford it. This means that they are often trapped for generations in a vicious circle of poverty and low education. 144. Shocks (insecurity) are another important cause of poverty, especially transitory poverty. Natural disasters (e.g., floods, cyclones, drought and earthquakes), macroeco- nomic shocks (e.g., financial crises, recessions, and a collapse in agricultural commodity prices), and catastrophic illness can easily push large numbers of people into poverty. The high cost of medical care and the large opportunity cost of illness (in terms of lost wages), combined with the general lack of medical and/or disability insurance, a catas- trophic illness in the family can wipe out years, if not a lifetime, of savings for a family and impoverish it. 145. In addition to the lack of assets and income shocks, social and cultural factors also play an important role in perpetuating poverty. The role of social and political exclusion is particularly important. Some groups are excluded from political participation because they are too few in numbers to attract government attention, too weak to lobby effectively for their rights and interests, or too unimportant as voters or taxpayers in the eyes of gov- ernment. The poor may also face social exclusion, both in the form of social discrimina- tion (e.g., discrimination against women, ethnic or religious minorities, orphans, and sin- gle mothers) and in the forn of not having adequate social capital - the network of in- formal norms and established relationships that enable people to act in concert for mutual benefit. 146. Exclusion greatly increases the risk of poverty, as excluded individuals and groups are less likely to find ways to benefit from economic growth opportunities and from formal safety-net programs. At the same time, severe poverty and deprivation can lead individuals or groups to exclude themselves from society out of a sense of shame and humiliation. In this sense, poverty and exclusion form a vicious circle, with exclu- sion increasing the risk of poverty and impoverishment in turn reinforcing exclusion. For this reason, exclusion is often identified as a facet of poverty and poverty as a facet of exclusion. Indeed, within a distributive justice-based definition of poverty, the absence of dignity and participation in social life are included as poverty indicators (Rawls 1971, Sen 1992). 147. An overwhelming share of Thailand's poverty is concentrated in the rural areas, especially in the rural Northeast. In the rural areas, land is the most important factor of production. Hence, one would expect inequality in the distribution of land to be an im- portant factor in explaining poverty.30 30For instance, one reason for the very low levels of rural poverty and income inequality in South Korea and Taiwan is the egalitarian distribution of land in those countries. This did not evolve naturally, but in- stead was the result of deliberate large-scale agrarian reform in the late 1940s and early 1950s designed to stave off the threat of communism. In South Korea, the 1949 land reform redistributed about one-half of all agricultural land (Haggard 1990) while the Taiwanese reforms of 1949-1953 redistributed about a quarter of the land (Ho, 1978). Thailand Sociul Afonitor 47 Poiveriv andl f'ublic 'folic 148. The Socioeconomic Survey data for 1998 are used here to analyze the determni.. nants of household income per capita and of the probability of an individual being in** come-poor.31 The results of the regression and probit analysis are shown in Table 3. The main empirical findings are discussed below. 149. Size of land holdings is an important cause of poverty in the rural areas. The re- sults indicate that a one-percent increase in land ownership reduces the probability of poverty by about 0.1 percent. The effect of tenancy is much greater; controlling for other factors, the probability of being a tenant (as opposed to a land-holder) increases the ri5k of poverty by nearly 30 percent. 150. Demographic factors have an important influence on the risk of poverty in both rural and urban areas. Larger families are at significantly greater risk of poverty than smaller families. On the other hand, individuals residing in households that have a larger proportion of adults (as opposed to children) are less likely to be poor. 151. The effect of residing in a female-headed household on rural poverty varies de - pending upon the age of the female head. Female-headedness increases the risk of povv- erty, but only when the female head is over the age of 55 years. Individuals residing In households headed by younger women actually have a lower risk of poverty than those in male-headed households.32 This may reflect the fact households headed by young women are likely to be those in which the adult male earner has temporarily migrated to an urban area for employment reasons. As such, these households may have access -to remittances and transfers from the male migrant. However, households headed by older women are likely to be those in which the adult male earner has died, and this may in- crease the risk of poverty for the widow and her relatives. Female-headedness has no significant effect on poverty in the urban areas. 152. Education has a powerful effect on reducing rural poverty. When the highest- educated adult in the household has primary or lower secondary education (as compared to no education), the risk of poverty declines by about 66-74 percent. The corresponding figure for tertiary (university) education is 90 percent. However, education has signi;i- cantly smaller effects on reducing poverty in the urban areas, as education is more wide- spread there. 153. Finally, geographic location has a strong influence on poverty. Even after con- trolling for all of the above factors, residence in the rural areas of the Northeast increases the probability of being poor by 56 percent (in comparison to being resident in the rurEaI South). In the urban areas, residence in Bangkok and vicinity reduces the probability of poverty by as much as 80 percent. 3'Strictly speaking, the regression analysis does not identify the causes of poverty, but instead the assoc ;,- tions between poverty and certain observable characteristics of individuals and households. 32 For instance, an individual residing in a household where the female head is 70 years old faces a 3.5 per- cent increase in the probability of being poor. But a person residing in a household with a female head aged 25 years old has a 6.5 percent lower probability of being poor. Thailand 5SociuI AUonifor 48 Poi7ertv antl Public Policv 154. Obviously, the empirical analysis discussed above is limited to variables that are observed and measured in the SES data. As such, it cannot (and is not meant to) identify all of the various determinants and correlates of poverty. The role of factors such as ex- clusion, social capital, and ethnicity in promoting poverty cannot be analyzed due to gaps in the available national data sets. Poverty in the Northeast 155. Since such a large proportion of the poor in Thailand are concentrated in the rural areas of the Northeast, it may be useful to see if the determinants of poverty in the rural Northeast are different than those in the rest of the country. Table 4 shows the estimates of separate probit equations for the probability of being poor for the rural Northeast. 156. The results suggest that the determinants of poverty in the rural Northeast differ from those in the rest of the rural areas in the country in four ways. First, the amount of land owned has a much stronger effect on reducing poverty in the rural Northeast than in other rural areas. For example, a one-percent increase in owned land reduces poverty by as much as 0.2 percent in the rural Northeast but only by 0.03 percent in other rural areas. Second, while being a tenant significantly increases the probability of poverty in the other rural areas of the country, it has no such effect in the Northeast, perhaps because tenancy is not as widespread in the Northeast as in the other parts of the country. 157. Third, somewhat surprisingly, schooling (with the sole exception of tertiary or university education) generally has a much smaller effect on reducing poverty in the rural Northeast than in other rural areas of the country. In fact, none of the lower levels of schooling (primary, secondary or vocational) have any significant effect on the probabil- ity of being poor in the rural Northeast. This is a most unusual result, since one would have expected education to be an even more important factor in reducing poverty in the Northeast than in other regions of the country. However, the empirical result most likely reflects the fact that the main value of education in the Northeast lies in moving out of the region to other regions of the country where higher-wage employment opportunities can be found. However, most such educated individuals who have moved out of the North- east are no longer captured in the SES survey. This is likely to substantially underesti- mate the estimated effects of education on poverty using the Estimated effect of female-headedness on the probability of being SES sample. poor, by age of female head 158. Fourth, while residing in E 01 a household headed by a female 005l of any age reduces the risk of f 00 poverty in the rural areas of thie 0 rest of the country, the situation t 0, L - Lps F 9 ° °° 04) 0 - is very different in the rural DC 9 i Northeast (Figure 39). There, * 0_ the age of the female head E -° 15s ° makes a big difference to the l -o 20 h]r 20 25 30 35 40 45 50 55 60 65 70 Age of female head (years) Figure 39 Thailand Social Aksnitor 49 Po 1vertv ali l'aitl'li Plo)iclv risk of poverty. For example, residence in a household headed by a woman aged 20 years reduces the probability of being poor by 0.13, but residence in a household headed by a 70-year old woman increases the risk of poverty by 0.13. Again, this is likely to reflect migration patterns. Younger women-headed households in the rural Northeast are typi- cally those where the main male bread-winner has moved to an urban area (typically Bangkok) for higher-wage employment. Persons residing in such households are there- fore less likely to be poor. However, older females heading a household are most likely to be widows, who typically have few sources of income, and persons residing in these households are likely to be at higher risk of poverty. 159. Thus, poverty in the rural Northeast is not only greater than in other parts of the country, but is associated with different causal factors. Land ownership has a signifi- cantly larger effect on reducing the risk of poverty for individuals in the rural Northeast than for individuals in other rural areas of the country. In addition, households headed by older women (i.e., those aged 45 years or more) are at significantly greater risk of povert-y in the rural Northeast, which is in stark contrast to the rest of the country, where female headedness is actually associated with a lower risk of poverty. Thus, anti-poverty pro- grams in the rural Northeast need to target small and marginal farmers and households headed by older women. Economic Growth, Inequality, and Poverty Reduction Across Provinces 160. There is a large literature on the relationship between growth and poverty which argues that economic growth is one of the important determinants of poverty reduction across a cross-section of countries (e.g., see World Bank, 2000; Dollar and Kray, 2000). This point has been empirically established for a cross-section of developing countries as well as for some individual countries over time. But little is known about the effect cl economic growth on poverty reduction in Thailand. 161. At an aggregate level, Growth rate in per capita GDP and changes in incidence of consumption-poverty, 1988-99 it is clear that poverty has 6p fallen rapidly in Thailand dur- 51996-9 ing periods of strong growth 3 in the economy, and that it has 299-99 increased during periods of O - weak or negative growth (Fig- 4 -\96 ure 40). -32 162. However, one problem 5 with analyzing the relation- 1988--\ ship between growth in per -s 12 1-94 capita GDP and changes in 79 - 0123 - -7 -6 -5 4 -3 -2 - 0 1 2 3 4 5 6 7 8 9 IC I poverty at an aggregate level % nnal growth in pr capita GDP is that there are relatively few data points to estimate the relation- g ship precisely. In addition, most studies on the poverty-growth relationship at the cross- Thailand Social -lionitaor 50 Poivlr!v aind P'ublic Policl country level have ignored the contemporaneous effect of changes in income inequality on poverty. Changes in income inequality mediate the effect of economic growth on poverty reduction. For instance, the impact of economic growth on poverty reduction will be smaller if it is associated with a worsening distribution of income. 163. An attempt is made in this Social Monitor to use household survey data from the Thai Socioeconomic Surveys, first, to calculate measures of growth, poverty, and distri- bution for each of the 76 Thai provinces, and to then analyze the relationship between poverty changes, economic growth, and distributional changes. Data from the 1994, 1996 and 1998 SESs are used for this exercise. 164. The regression analysis (shown in Table 5) suggests that poverty levels have a strong inverse association with mean per capita income in a province and a strong posi- tive association with income inequality. Surprisingly, these results continue to hold even when changes in poverty are related to changes in mean per capita income (i.e., eco- nomic growth) and changes in income inequality.33 The empirical results indicate that an increase of Baht 100 in real monthly income per capita is associated, on average, with a poverty reduction of 1.3 percentage points in Thailand's provinces. As would be ex- pected, the poverty-reducing impact of equivalent mean income growth is greater among poorer provinces than among better-off provinces. For a province with mean monthly per capita income of Baht 1,000 (in constant 1994 Bangkok prices), an increase of Baht 100 in real per capita income would result in a reduction in poverty of 1.6 percentage points. However, for a much richer province hav- Figure 41 ing mean income per Shares of each region in total GDP and population increase taking capita of Baht 8,000, place in Thailand between 1987 and 1996 the reduction in pov- erty incidence from a 9U South Baht 100 increase in 90% C Northeast income would only 30% be 0.1 percentage 70% U North 3. points. Clearly then, 60% [ ! Central income growth at the 50% 0 Bangkok and provincial level can 40% Vicinity have a powerful im- 30%- pact on poverty re- 20% duction, especially 10% among poor Thai 0% provinces. If this is % share in GDP increase % share in population increase the case, why has 33Typically, the relationship between provincial poverty levels and mean per capita income levels becomes weak and insignificant when changes in poverty and changes in mean income are considered, because the latter association effectively controls for unobserved province-specific factors, such as the geographical location of a province, the quality of its land, its history, the quality of its administration, and various cul- tural factors, that may be important determinants of its poverty level (as well as of its mean income level). Those factors are visible in the levels of poverty and per capita income, but are no longer present in the changes in these indicators from one year to another. haildand Sociul A1fonitor 51 Polverty and/ I'ihlic Polict poverty remained stubbornly high among poor provinces? 165. The regression results point to one reason why poverty reduction has been slug- gish in some of the poorer provinces in Thailand. The results indicate that increased in- come inequality is positively and strongly associated with increases in poverty, even after controlling for the impact of economic growth. A one-point increase in the Gini index of income inequality is associated with a 0.8 percentage point increase in poverty incidence. Thus, a province having mean monthly income per capita of Baht 1,000 would experi- ence a poverty reduction of only 0.4 (instead of 1.6) percentage points with an increase of Baht 100 in real per capita income if that increase in mean income was accompanied by an increase of 2 points in its Gini index of income inequality (e.g., its Gini index went up from 52% to 54%). Thus, worsening income inequality can substantially offset the bene- ficial effect of economic growth on poverty reduction, and appears to have done so over the 1994-98 period. This will be analyzed for Thailand as a whole further below. 166. Another reason for the sluggish poverty performance in poorer provinces is that growth of household income per capita has been far from equal across provinces.34 As noted earlier, many of the poorest provinces in the country have in fact experienced de- clines in real income per capita over the period 1994-99. Admittedly, this is the result of the uneven impact of the economic crisis on the poorest provinces. However, even in the pre-crisis period, economic growth was unevenly distributed across provinces and re- gions. Figure 41 shows that 'Bangkok and Vicinity' accounted for 52% of the increase in national GDP between 1987 and 1996, even though it accounted for only 11% of the na- tional increase in population over that period. In contrast, the Northeastern region, which accounted for nearly one-third of the population increase in Thailand during those nine years, had a share of only 11% in the national increase in GDP over 1987-96. Thus, Bangkok residents enjoyed a share of the national income gain that was about five times as large as their share of the population gain, while the corresponding ratio for the resi- dents of the Northeast was a mere one-third. 167. To better demonstrate the effects of changes in inequality on changes in poverty,35 an analysis similar to the one undertaken above can be done at the aggregate level for the country as a whole. In other words, one can decompose the total change in poverty inci- dence in Thailand between any two periods of time into the change that occurred due to economic growth (i.e., keeping constant the distribution of income) and the change that occurred due to changes in the income distribution (i.e., holding income constant). Ob- viously, the first effect will always be negative since economic growth in the absence of any distributional changes will always reduce poverty. However, the latter effect can be either negative or positive depending on whether growth is accompanied by improving or worsening inequality. 341ndeed, using the example in the previous paragraph, economic growth rates (i.e., per cent increase in mean real income per capita) have to be eight times as large in a province having mean income per capita of Baht 1,000 as in a province having mean income per capita of Baht 8,000 for both provinces to experi- ence an equivalent (Baht I 00) increase in mean income per capita. 35A somewhat similar exercise has been done for Thailand, Korea and Laos by Kakwani and Pernia (2000). However, the figures shown in this section have been calculated independently and presented somewhat differently than in that paper. The overall conclusions remain the same. Thailand (Social A/.onit'o 52 Poi'erlv' andi PuIblic Polici, 168. As discussed earlier, Changes in the income-poverty beadcount ratio and in the number of the headcount ratio of pov- income-poor persons decomposed into changes due to growth and erty in Thailand declined changes due to distributional shifts, 1992-94 to 1998-99 significantly from 1992 to 4 Change In poerty headcount ratio (% points) Change in number of poor (millions) 1996 - from 23.2% to 11.4%. However, this de- cline was reversed with the E 0 _ onset of the economic cri- o ..3 -0.2 sis. The incidence of pov- ° -2 _ erty increased to 13% in . -6.2 1998 and 15.9% in 1999. _4_ Figure 42 shows the results * Change due to distributional shif -6 _ O Change due to growth of the decomposition analy- Cg r sis for the four time peri- -8 1992-94 1994-96 1996-9S 1998-99 1992-94 1994-96 1996-98 1998-99 ods: 1992-94, 1994-96, 1996-98 and 1998-99. What is Figure 42 striking is the reversal in the con- tribution of inequality to poverty changes since the economic crisis. In other words, the incidence of poverty and the number of poor in the country in 1998 and 1999 would have been lower than they actually were, had there been no change in the distribution of in- come. This reflects the fact that the distribution of income worsened after the crisis. 169. In the beginning of the decade, rapid economic growth caused a large decline in poverty incidence and the number of poor, with changes in distribution playing a rela- tively small role. For instance, between 1992 and 1994, the poverty headcount ratio de- clined by 6.9 percentage points (Figure 42). The contribution of growth to the total de- cline was 6.2 percentage points (or 90%), and that of a slightly improving distribution of income was 0.7 percentage points (or 10%). Had the income distribution not improved during this period, the reduction in poverty incidence would have been somewhat smaller (6.2 percentage points), implying that the improvement in income inequality reduced poverty incidence by 0.7 percentage points more than what it might have been with no distributional shifts. The size of the distributional effect relative to the growth effect was small because growth was so strong. Between 1994 and 1996, there was hardly any change in the distribution of income, but since economic growth was strong, poverty de- clined by another 4.9 percentage points. 170. Just as income growth slowed down dramatically in the aftermath of the crisis, income inequality began increasing. This accentuated the increase in poverty. For in- stance, between 1998 and 1999, poverty incidence increased by 3 percentage points. Had the distribution of income remained neutral between 1998 and 1999, the incidence of poverty would have fallen by a modest 0.5 percentage points - not increased by 3 per- centage points, as it actually did. In terms of absolute numbers, the worsening inequality resulted in an additional 2.1 million persons becoming poor between 1998 and 1999. Thailand aSocia zl -fonif- 53 Poeiitv and Piblic Polic, 171. What this suggests is that income inequality can play a critical role in poverty re- duction, especially in a low-growth environment. 172. In a recent paper, Kakwani (2001) has developed a methodology to measure the tradeoff between inequality and growth in a country. The index, which he calls 'the ine- quality-growth tradeoff index or IGTI', indicates the amount of economic growth that is needed to offset the adverse impact of an increase in income inequality on poverty. As an example, an IGTI of 3 for a particular country would imply that a one-percent increase in the Gini index in that country would need to be offset by an economic growth rate of 3 percent in order to keep poverty incidence in the country constant. Thus, the larger the value of IGTI, the greater is the potential benefit of inequality reduction. 173. Using household survey data for 1998, Kakwani then calculates the value of the IGTI for two measures of poverty - the poverty gap ratio and the poverty severity ratio - for four countries in Asia (Laos, Philippines, South Korea and Thailand). He finds that, for both the poverty gap and the poverty severity ratios, Thailand has the highest values of the IGTI among the four countries. For example, the IGTI for the poverty gap ratio is 4.1 for Thailand, as compared to 0.9 for Laos, 1.2 for Korea, and 2.3 for the Philippines. This means that, for Thailand, a reduction of one percent in income inequality is equiva- lent to having a growth rate of 4 percent. Indeed, the benefits of inequality reduction are significantly greater in Thailand than in any of the other three Asian countries. These results again imply that a strategy of inequality reduction can have very high pay-off in Thailand relative to other countries. 174. In both the provincial and national analysis discussed in the two earlier sections, one maintained assumption is that economic growth and income inequality are independ- ent of each other. However, in a recent paper, Barro (2000) has shown that initial levels of inequality have a negative effect on subsequent growth rates in developing countries, although he does not find a similar effect for more developed economies. Human capital investments are one mechanism through which improvements in the distribution of in- come may foster growth. In developing countries, credit constraints may prevent the poor from investing in human-capital investments (e.g., schooling) that offer high rates of return. In such a situation, a redistribution of assets and incomes from the rich to the poor will result in more human-capital investment, and this in turn will raise the average productivity of investments and thereby the growth rate of the economy. 175. The provincial data for Thailand strongly support Barro's findings (Table 5). Provinces that had a higher level of income inequality (as measured by the Gini index) in 1994 were more likely to have lower economic growth rates in each of the subsequent periods (viz., 1994-96, 1996-98, and 1998-99). The regression estimates indicate that a one-point increase in the Gini index is associated with a 0.4% decline in the growth of real income per capita. Thus, income inequality has two effects on poverty reduction: first, increased inequality is associated with increased poverty after controlling for eco- nomic growth; and, second, high levels of inequality can reduce future growth rates in the economy, thereby impeding the poverty reduction that would have taken place in the presence of rapid growth. Thaildand ciul l fonilor 54 PovwrtY and IPublic PolicIv 176. The foregoing analysis strongly suggests that inequality in Thailand needs to be treated more seriously as a policy problem, on a par with poverty, and as a major deter- minant of poverty. Inequality is, however, difficult to change through standard policy instruments, and tends to shift slowly over time. One challenge for Thailand policy makers will be to prevent further erosions in the distributional equity of the Thai econ- omy. Policy and Research Issues 177. This chapter has explored the evidence on several policy issues that are central to addressing poverty and inequality in Thailand. These more strategic issues will shape the choices that policy makers will confront as they design programs to deal with poverty. 178. What are the findings on these key issues? Self Reliance and Safety Nets: Thai families provide a substantial and enduring safety net to each other and within the family, and have thus moderated the severe impacts of the crisis. Through cash remittances and gifts, the poor in particular have benefited on a net basis from the generosity of friends and family, and this pattern increased during the crisis. While the crisis itself added 4.5% to the level of poverty, these transfers were able to prevent up to a further 5 to 6% of Thai families from falling be- low the poverty line. Policy makers face a difficult dilemma in designing new secu- rity enhancing programs: they must avoid incentives that could serve to reduce volun- tary private assistance, but must take action to protect those who fall through the cracks. Insurance based mechanisms, rather than a purely transfer approach, may help sustain self reliance and mutual assistance. e Causes of Poverty: Land ownership, tenancy status, and education appear to be some of the strongest determinants of poverty in Thailand, especially in the rural areas. In addition, in the rural Northeast, households headed by females aged 45 years and over are at particularly great risk of poverty. This suggests that, in the short run, poverty programs need to target small and marginal farmers, tenants, and households headed by older women. In the long run, land reform and expansion of education to the poor would be effective poverty-reduction strategies. * Structural or Transitory Poverty: Poverty in Thailand is becoming more structural or in another word more "chronic" which means that those households in poverty today are likely to be poor tomorrow. The evidence for this conclusion comes from a num- ber of perspectives, such as the persistence of poverty among certain household groups, the stable ranking of regions in respect to poverty levels, and the growing di- vergence in mean income and poverty levels between the poorest regions and the bet- ter off. At the provincial level, the poorest provinces tend to remain in that status year after year. These findings point to the increasingly difficult challenge of lifting people out of a relatively small poverty group of 15% of the population. The chal- lenge for Thai policy makers is how to reach this group of increasingly chronic poor, and to do so with efficient targeting. There are a number of interventions that have been used in other countries to reach such groups, but Thai policy makers will need to Thailand Social Monitor 55 P1oi,erI1v' anl P'ublic Policl shape their choices to Thai realities. A critical question is whether economic growth alone can be expected to do this, once recovery in Thailand takes hold. * Natural Resources and Poverty: The nexus of poverty and natural resource degrada- tion is an important area for further analytical work and policy development in Thai- land. More research needs to be done on how natural resource constraints affect the persistence of poverty in the northeast of Thailand, where both poverty and natural resource problems are concentrated. Whether restoration of natural resources can re- duce poverty while increasing the stock of environmental capital is an important em- pirical question. * Gender and Poverty: The role of gender as a determinant of poverty and in the effort to reduce poverty presents a mixed picture in Thailand. While most social disparities have eased or disappeared (women outnumber men in Thai universities), others have proved highly resistant to change, particularly economic disparities in wages and op- portunity. In the Northeast, female headed households show a distinctive probability of poverty. Some social problems affect women disproportionately, such as AIDS and domestic violence. And women remain heavily underrepresented in the political process. Gender issues need to be taken into account more systematically, particu- larly in respect to anti poverty interventions. - Growth, Inequality, and Poverty: For most of its recent history Thailand has relied on rapid economic growth to lift people out of poverty, but this process has slowed, in- evitably, as the poverty sub group has steadily diminished in size. But is this the only factor at work? Have changes in the distribution of income also played a role? Prior to the crisis, Thailand enjoyed a double boon for the poor: high rates of growth and improving income distribution since 1992. After 1996, both trends have shifted direction: the economy contracted and in the process, the poor endured the brunt of the decline, as income distribution worsened. From 1998 to 1999, poverty incidence increased by 3%; if inequality had remained unchanged, the increase in poverty would have been only 0.5%. At the provincial level, inequality also plays a strong role in poverty outcomes, even after controlling for the impact of growth. Inequality is much harder to deal with from a policy perspective, but, at already high levels, the government will need to guard against further increases in income inequality that would exacerbate social tensions. Thailand Social. onitor 56 Poverty anl1d Public Policy Table 3: Estimated maximum likelihood probit equations for the probability of being income-poor, by rural and urban areas, 1998 Villages (Rural are s Municipal and Sanitary Districts Marginal effect Elasticity Robust Marginal effect Elasticity Robust Independent Variable (dF/dX) at mean std. error (dF/dX) at mean std. error Household size 0.0404 1.075 0.0041 0.0034 0.425 0.0008 Number of earners -0.0203 -0.292 0.0051 -0.0005 -0.033 0.001( No of members aged 25-44 yrs in household -0.0008 -0.210 0.0002 -0.000 -0.318 0.0001 No of members aged 45-59 yrs in household -0.0014 -0.126 0.0003 -0.0003 -0.127 0.0001 No of members aged 60 yrs and older in household -0.0019 -0.125 0.0004 -0.0002 -0.070 0.0001 Whether highest-educated member of household has: Primary schooling -0.128 -0.740 0.0251 -0.0015 -0.043 0.0061 Lower secondary schooling -0.114 -0.66 0.0148 -0.008 -0.25 0.004 Upper secondary schooling -0.131$ -0.761 0.0112 -0.0115 -0.335 0.0031 Vocational education -0.141 -0.81 0.008 -0.0145 -0.42( 0.004( University education -0.154 -0.89( 0.0049 -0.023 -0.69 0.004E Age of household head 0.000 0.15 0.0005 0.0001 0.14 0.0001 Whether household head female? -0.1211 -0.698 0.0233 -0.0068 -0.199 0.007( Whether household head female X Age of head 0.002, 0.0007 0.0001 0.0004 Dummy for second quarter -0.002! -0.010 0.0120 -0.0003 -0.01( 0.0025 Dummy for third quarter 0.007' 0.044 0.0121 0.0000 0.00( 0.0024 Dummy for fourth quarter 0.0101 0.058 0.0124 0.0044 0.13( 0.0028 Owned area (rai) -0.0018 -0.096 0.0004 Whether tenant cultivator? 0.0513 0.296 0.017( Dummy for Bangkok . -0.0270 -0.795 0.0025 Dummy for Central region -0.0681 -0.396 0.0112 -0.0089 -0.261 0.0023 Dumimy for North -0.036( -0.208 0.0121 -0.0037 -0.109 0.0023 Dummy for Northeast 0.096' 0.55t 0.0132 0.0111 0.341 0.0040 Proportion of sample income-poor 0.1733' -226.1948 0.0340 Log likelihood ratio -4,22( -1,527 Weighted number of observations 16,18' 7,359 Wald chi-square statistic 606.47 297.81] Notes: Coefficients in bold are significant at the 5 percent or lower level. hailand Social Moli2or5 Table 4: Estimated maximum likelihood probit equations for the probability of being income-poor, Rural Northeast and Rural Other Regions, 1998 Rural Northeast Rural Other Regio:s Marginal effect Elasticity Robust Marginal effect Elasticity Robust Independent Variable (dF/dX) at mean std. error (dF/dX) at mean std. error Household size 0.057, 1.062 0.010 0.0305 1.242 0.0034 Number of earners -0.0214 -0.221 0.0116 -0.018 -0.398 0.0046 No of members aged 25-44 yrs in household -0.0007 -0.11 0.0004 -0.0009 -0.398 0.0002 No of members aged 45-59 yrs in household -0.002 -0.141 0.000 -0.0009 -0.127 0.0003 No of members aged 60 yrs and older in household -0.0031 -0.119 0.0008 -0.0011 -0.132 0.0003 Whether highest-educated member of household has: Primary schooling 0.0228 0.087 0.108 -0.1074 -0.981 0.0186 Lower secondary schooling 0.01 15 0.04 0.113 -0.0901 -0.823 0.0093 Upper secondary schooling -0.0343 -0.1311 0.104 -0.0981 -0.89 0.007 Vocational education -0.1476 -0.563 0.0695 -0.1002 -0.915 0.006t University education -0.2486 -0.948 0.0146 -0.0981 -0.896 0.0048 Age of household head 0.0013 0.243 0.001= 0.000 -0.021 0.0005 Whether household head female? -0.2323 -0.88 0.047 -0.056 -0.51 0.0241 Whether household head female X Age of head 0.0051 0.0015 0.0003 0.0007 Dummy for second quarter 0.011 0.045 0.0260 -0.0109 -0.10 0.0101 Dummy for third quarter 0.031( 0.121 0.0263 -0.0065 -0.059 0.0104 Dummy for fourth quarter 0.056 0.215 0.027 -0.013 -0.125 0.0102 Owned area (rai) -0.004' -0.211 0.0008 -0.0004 -0.028 0.0003 Whether tenant cultivator? -0.015( -0.057 0.0344 0.0621 0.567 0.0156 Proportion of sample income-poor 0.2621 0.1094 . Log likelihood ratio -1,655 -2,261 Weighted number of observations 6,181 4,441 Wald chi-square statistic 176.3 341.08 . Notes: Coefficients in bold are significant at the 5 percent or lower level. Thailand Social Montitor 58 Poverlj' etad Public Policy Table 5: Cross-province regressions of incidence of income-poverty, 1994-99 Levels (OLS) First difference (changes Independent Variable Parameter T-ratio Parameter T-ratio Mean per capita income -0.01975 -20.13 -0.0182295 -9.02 Mean per capita income squared 1.56E-06 12.83 1.05E-06 7.86 Gini ratio (x 100) 0.694632 11.47 0.7756918 9.52I Dummy for 1996 -1.83657 -1.74 Dummy for 1998 -0.84451 -0.8 1.794845 1.86 Dummy for 1999 0.854989 0.81 3.443878 3.58 Intercept 20.58896 6.09 -1.227703 -1.59 Number of observations 304 228 F ratio 148.73 30.55 R-squared 0.7503 0.5571 Thailand Sociall Monitor 59 J'ov erivt, and Public Policv Chapt 5. Empowering the Poor ] "Ifyou don 't have a strong community, anything you do will be set to fail. No matter how much the government or authorities might try to help, nothing will be accomplished. But with a strong community, coupled with government support, you can foster development which can stand on its own. " Phra Subin Panito, the spiritual leader of Baan Pret, Bangkok Post, January 11, 1999. 179. Poverty is no longer seen as merely a lack of income and a lack of access to basic human needs such as education and health. Poverty encompasses many more dimensions. To understand poverty in all its dimensions one must also examine issues such as the poor's vulnerability to shocks be they from ill-health, economic or natural disasters and the powerlessness of the poor in their ability to influence key decisions affecting their lives due to lack of political freedom or voice. Thus to develop an effective strategy for poverty alleviation one has to address these other dimensions. The success of anv' poverty alleviation strategy will heavily depend on the ability and desire of any nation to promote opportunities, empower its people, and enhance their level of security. 180. The next chapter will assess the performance of programs that were introduced 1o expand opportunity for the poor and to improve the security of the poor from unexpected shocks. This chapter will focus on empowerment. Why is "empowerment" a key to poverty reduction? It means giving voice to the people and allowing them to have a say in their own development. Many studies have demonstrated the positive effects of participation and local decision making on the performance of projects and programs. What does this mean in the context of Thailand? It means decision-making by policy makers should be done in collaboration with civil society at all levels - NGOs, academics, community organizations, and communities themselves. 181. The concept of empowerment is not a new one for Thai society. Empowering the community in Thailand means building social capital and promoting self-reliance. It means crafting a development paradigm that is balanced and brings harmony back into the society (as posited by the Ninth Development Plan) and moving away from the "excesses" of the high-growth era which led to commensurate high social costs. Efforts aimed at strengthening Thai society have been embodied in different ways: starting with the lessons of H.M. the King calling for Thai people to be more self-reliant; to legal reforms mandated by the new Constitution; to the development agenda advanced by the 8th and 9th National Development Plans; and finally to the growing grassroots movements among the people themselves seeking a larger role in policy formulation. 182. The political landscape in Thailand has been dominated by short-lived coalition politics. Elections have encountered problems of vote-rigging and been subject to the manipulation by powerful business interests. The influence of the military shaped Thai politics for the last half century, however this influence has waned with the emergence of civil society. The failure of a military coup in 1992 marked the beginning of a ne'A' civilian influence in politics, institutionalized with the passage of constitutional reform in 1997. Thailand Social lonuitor 60 Poi,ertlv and1 Public Pf)licv Support From the Legal Environment 183. In the years leading up to the economic crisis, many currents of social reform were gaining momentum in Thailand. Civil society organizations and leaders pushed for political reform and government policies more responsive to the lower income and vulnerable groups. Their activities culminated in the drafting of the new Constitution which was promulgated just months after the advent of the crisis in July 1997. Designed to end the inertia that has virtually paralyzed previous governments, it is widely regarded as the "People's Constitution" and the key to social reform in Thailand. 184. The new Constitution creates the framework for the restructuring of national representative institutions and reform of the electoral process. It introduces a number of new measures to empower civil society and safeguard individual liberties. Along with the promotion of greater political accountability and transparency, Box 10: Giving the Power to the People - the Constitution emphasizes The Thai Constitution gender equality, environmental A preservation, local resource Article 45 - Grants individuals the right to form an management, community association, a union, league, co-operative, farmer emangerment, andbasicm nighty ~ group, private organization, or any other group. empowerment, and basic rights in education and health. It takes * Article 58 - Grants individuals the right to have access unprecedented steps against to public information. abuses of power and conflict of interest. Infringements of Article 59 - Grants individuals the right to receive oersonal rights is prevented by information and express their opinion from agencies personal rights before permission is given for the operation of any one of Asia's most liberal codes projects that may affect the quality of the environment, to support individual freedoms. health and sanitary conditions, the quality of life or any other material interest concerning a person or a local 185. The Constitution community. provides the legal foundation for Article 60 - Grants individuals the right to participate in community empowerment. decision-making process of government officials in Many of its provisions - from those areas which affects or may affect their rights or the decentralization of power to liberties. the local level, to the right of access to information, and the Article 76 - Duty of State to promote and encourage right to participate in the public participation in the decision-making process at decision making process at all all levels. levels (see Box 10) - have * Article 78 - Duty of State to decentralize power to local become powerful tools for civil authorities. society in its efforts to reform the political and social environment of Thai society. Thailand Social A-ton i/or 61 Poi'r ai d I'aPblic Policl' Institutional Environment 186. Complementing the Constitution, the Eighth Plan (1997-2001) prepared by the National Economic and Social Development Board (NESDB), the Thai planning agency, emphasized an agenda of "people-centered development". A widely consultative process was launched, seeking inputs from local communities and non-governmental organizations in the formulation of the Plan. The result was a document focusing on the poor and under-privileged, and with initiatives designed to empower local communities through decentralization of government, public participation in the Government's decision-making process, increased transparency and improved governance, and the building of local capacities and self-reliance. 187. Implementation of the 8th Plan has been launched in several ways. The Plan calls for the coordination of government and non-governmental activities. Monthly learning forums held at the NESDB share local-level development experiences and new initiatives. Provincial civic forums have been promoted to encourage all concerned parties including the public to participate in the planning and decision making in each province. District and sub-district civic forums are also being encouraged. 188. Building on the 8th Plan and the reform agenda supported by the Constitution, the NESDB has solicited inputs from various segments of civil society for the Ninth National Economic and Social Development Plan (2002-2006). The Ninth Plan espouses four main objectives (i) poverty alleviation (see box 11); (ii) support for good governance (iii) adherence to the new economy & self-sufficiency; and (iv) strengthening the social foundation through the enhancement of the quality of life and protection of natural resources. The 9th Plan embodies the growing sentiment in Thai society calling for a more balanced approach to development. It is believed having a more balanced approach will improve the lives of all Thais and help to narrow the inequality gap as well as protect the most vulnerable groups in society. Progress in Implementing Reforms Mandated by the Constitution 189. Corruption can and will effect the economic performance of a country, not only does it undermine opportunities, it makes efforts to reduce poverty that much more difficult to achieve. Reforms emphasizing accountability and transparency are all mandated by the new Constitution. New institutions, such as the National Counter- Corruption Commission, the Electoral Commission, the Administrative Courts and the Office of the Ombudsman have been established and are proving to be effective in their efforts, thus gaining public confidence. These institutions are powerful mechanisms to increase the voice and concerns of Thai communities, and in particular the poor. 190. The Constitution also contains several provisions aimed at combating endemic political corruption and electoral fraud. The entire electoral process has been revamped - in the year 2000 Senate elections were introduced for the first time in Thai history. The democratization of the election process, while faced with many problems, is an Thailand Social .A-Jnitor 62 Polertv anld I'iublic Policl encouraging step towards making the state more accountable and responsive to its citizens. Box 11: The 9th National Economic and Social Development Plan and Poverty Alleviation Poverty reduction has been recognized by the Thai Government as a high priority area in the Ninth National Economic and Social Development Plan. The Plan perceives poverty not only in terms of inadequacy of income, but also as a structural problem - lack of access to basic services, resources and information, and lack of participation in development and decision-making. The Plan is based on the philosophy of sufficiency economy. This philosophy, in turn, is based on the principle of the middle path - moderation, balanced and rational development, awareness of the changing world, and the quality of the people. One of the Plan's main objectives is to alleviate poverty and to improve the potential of and opportunity for Thai people to be self-reliant. The Plan's goals are to provide equitable access to education and social services to the poor and the disadvantaged. A mainstay of the Ninth Plan is pro-poor growth - viz., growth of economic sectors that the poor typically rely on and growth that provides employment opportunities and generates income for the poor. The Plan targets are to reduce poverty incidence to less than 10 percent of the population in 2006. To achieve the above objectives, each of major strategies proposed by the Plan incorporate poverty- reduction measures as an integral element. The reduction of poverty is to be accomplished by three simultaneous means: (i) Empowering civil society to recognize the importance of poverty and to participate in poverty alleviation. In particular, the Plan calls for all sections of society, including politicians, to have a proper understanding about poverty and to have positive attitudes toward the poor. (ii) Improving the capability of the poor and ensuring social security for the poor by urging formation of occupational and/or saving groups among the poor. Through these forums, the poor will be able to learn from each other's experiences, to make collective decision, and to establish networks of community welfare. Non- government organizations, local education institutions, and religious institutions will be encouraged to play an active role in the poverty-reduction process. The ultra poor will be guaranteed basic necessities such as food,-- health insurance, and a living allowance. The state will also help improve productivity of the rural poor. In addition, the local economy will be enhanced, so that the poor can be self-reliant and have more job opportunities within their own localities. For the urban poor, emphasis will be placed upon access to education and health services, securing a livelihood by linking community businesses with industrial businesses at various levels, and ensuring a healthy living environment. (iii) Adjusting the public administration system to correct structural impediments that cause poverty by coordinating both public programs and the budget allocation process, so that both will be more responsive to poverty problems. The Plan sees the state as financing crucial programs, but local authorities as implementing these programs. The Plan calls for legal reform and amendment of rules and regulations so as to grant the poor opportunities, rights, and equality in social welfare, labor protection, rights to information, and entitlement to commercialize local wisdom. The Plan calls for taxation to be made more efficient and expanded in such a way that it promotes social equity, while minimizing impact on the poor. Source: National Economic and Social Development Board Decentralization As A Tool For The Poor? 191. The Constitution requires the State to decentralize service delivery and financing to local authorities. Since 1999, 4 different decentralization laws have been enacted, including the Decentralization Act. In 2001, the share of local revenue relative to total government revenues will increase to 20%, and eventually to 35% of total government Thailan7d Social Afon7itor 63 P1ow)Vf3rl' anci Public P)olicv revenues by 2006. In Fiscal Year 2001, central government subsidies were increased in order to meet the 20 percent target. 192. Currently a plan for decentralization of functions has not been translated into local expenditure assignment for different government functions. Ideally, decentralization would be driven by consideration of which level of government could most efficiently and effectively deliver and finance public services. Decentralization experience in other countries has shown that it is more effective to decentralize expenditure responsibility before decentralizing resources. That the focus in Thailand remains on the revenue side is in part because of the target set by the Constitution on increasing local revenues. There is currently no budget or plan for sub-national expenditures. 193. Local governments rely heavily on shared taxes and subsidies from the local Government. In Fiscal Year 2001, it is estimated that 43 percent of local revenues and grants were from shared taxes, and 44 percent from grants leaving only 13 percent being local collected revenue. Heavy reliance on shared taxes and subsidies reduces local accountability and reduces the predictability of revenue flows. See Box 12 for a description of the system of subsidies currently in use (Thailand Economic Monitor, July 2001). 194. Efforts to decentralize central government functions have been underway in many developing countries since the 1980s. This devolution of responsibility has occurred for a variety of reasons - as a result of increasing political pressure or the desire to deliver more efficient public services. It is argued that decentralization can result in increases in allocative efficiency because lower levels of government have better information regarding local needs and preferences. Decentralization is also supposed to increase productive efficiency because it will result in greater accountability at the local level and increased participation in the decision-making process by communities (Bahl 1999: PREM Notes 2001). Decentralization, however, if not done properly can also lead tc increased regional disparities and inequities. In fact, decentralization may not have as positive an impact as desired if the constituents in local communities are not kepi informed or allowed to participate in the decision-making process. Therefore. empowering local communities to have a voice in the decisions that impact their dail, lives can lead to more accountable local government and even better provision of public services. 195. Can decentralization strategies and mechanisms lead to better outcomes in poverty reduction? Studies in both Vietnam and Argentina revealed that central governments were more effective than subnational governments in targeting poorer areas (Ravillion, 1998 and Van De Walle 2001). Indeed the evidence has shown that central governments are generally better at redistributing resources to poor provinces, than provinces are to poor areas. 196. Thus for decentralization to be an effective mechanism for making state institutions more responsive to the concerns of the poor, civil society will need to be engaged in the local decision-making and monitoring process. Although, the process of Thailand Social A noitor 64 PC)ryeroand lh'blic Poli CV administrative decentralization has begun in Thailand, progress has been slow. Participation of civil society at the level of program and project design has visibly increased but their role in public policy formulation still needs strengthening. The latter will be critical to ensure improved local accountability and transparency. Box 12: Central Government Subsidies to Local Authorities General grants: Grants distributed to local governments based on indicators. Indicators such as number of students, elderly, villages, and population, and local revenue, are used as proxies for local expenditure needs and revenue capacities. The grants are administered by the Department of Local Administration (DOLA) in the Ministry of Interior. Specific grants: Also administered by DOLA, these grants are to be spent on specific purposes. Grants with transfer of responsibility: Grants given only to Tambon Administrative Organizations (TAOs). An instrument used for FY01 and FY02 to help the transition from central to local service delivery. An amount is set aside for each local government for specific purposes. Before the funds are disbursed, local governments must submit a plan and be able to procure the project. The grants are administered by various agencies. Sectoral block grants: A grant given to local governments that specifies which sector to spend the money on, but granting local governments much more autonomy than the two grants mentioned immediately above. This instrument is not yet implemented, but planned to be used from FY03 and beyond. The subsidy system is changing during the process of decentralization. Before FY01, the Central Government relied on the general and specific transfers. During a transition period, "Grants with Transfer of Responsibility" were introduced to allow the Government to decentralize according to the pace of local capacity building. From FY03, these grants will be replaced by sectoral block grants. Source: Thailand Economic Monitor, World Bank Office Bangkok, July 2001. Empowering Communities 197. The role of civil society in Thai politics and society has witnessed a remarkable evolution. Civil society organizations have developed and expanded in number since the mid 1990s, when the new Constitution was being drafted and the 8th Economic and Social Development Plan was in preparation. Both of those documents empowered civil society, and in the few years since the onset of the crisis in 1997, the voice of civil society, their overt role in the political process, and their participation in vigorous development debates have visibly grown and accelerated. 198. Approximately 18,500 non-governmental organizations (NGOs) are currently registered, and many more are operating without legal status. These NGOs are forming themselves into networks. The trends show an increasing rate of participation in a variety of community organizations, but the most striking example is the high level of demand for formation of organizations centered around the improvement of the economic situation of group members. The exact numbers regarding geographical distribution of rl7Thiland Social Mon-f)s7it(or 65 Port'crv andl Ptublic PolicIy such groups is not readily available, however there is evidence that a considerable presence exists in the poorer regions of the country (i.e. the Northeast and the North). 199. Civil society organizations are playing an increasingly important role in providing social protection at the community level. The Thai government as well as donors have allocated an increasing proportion of their budgets to civil society organizations to implement programs including HIV/AIDs prevention and treatment, care of the elderly, small and medium enterprise development, and environmental protection. Data regarding the degree to which the poor are involved and participating in such initiatives is not readily available, however the Social Investment Fund offers one example of a program that attempts to target the poor (see Box 14). 200. His Majesty The King's recently espoused theory of "self-sufficiency" at the family and community levels has encouraged the government to focus more attention and resources on building strong communities. Thus in 1997, the Government viewed the economic crisis Box 13: The Remedy for Poverty as an opportunity to forge new development partnerships with civil society and take steps L' In my opinion, the remedy fcr towards empowering communities to solve their poverty is empowering the poor ..." own problems. This approach was aimed at Source: Participant comments at a TDRI rebuilding and consolidating social capital eroded Poverty Workshop, December 22, 2000 by economic growth and to strengthen the unofficial, community-based "safety net." (see Chapter 4 for the empirical evidence on informal safety net performance). Much support now goes directly to community-based organizations, such as savings and credit groups, women and children groups. Programs Aimed At Supporting Community Initiatives 201. There were many government programs that focused on community empowerment activities during the crisis. For example, the Government established the National Social Policy Committee (NSPC) to address social issues in Thailand. One of the key approaches of the NSPC "is to empower communities to respond to the crisis impact at the community level and to create an enabling environment for local communities to deal effectively and holistically with the impacts of the crisis on the community" (United Nations 1999). 202. The NSPC set up a Community Empowerment for Response to Crisis Action Plan (CERCAP) which seeks to empower communities to identify and prioritize issues and problems resulting from the crisis through participatory planning and action. UNDIP financed this initiative. More than 200 staff of the Rajaphat Institute were trained to be community facilitators that would bring community groups and other partners to manage and monitor their own crisis-response initiatives. Moreover, the NSPC provided funding in the amount of 40 million baht (approximately US$ Imillion) for a pilot project to create more opportunities for civil groups at the local level, both formal and non-formal. to participate in local policy formulation. Thailand Social Allo ni/or 66 Pov'ertv and Puiblic Policy 203. The National Social Policy Committee created the Pattana Thai Foundation to channel over baht 40 million in government funds to: (i) conduct pilot projects to support local communities to establish civic forums in every province; (ii) set up community learning centers for social services and sustainable development; and (iii) planning, monitoring and evaluation. 204. In September 1998, Government, with the assistance of the World Bank, UNDP, and AusAID, launched a new initiative in this area, the Social Investment Fund which provides grants to community-based organizations to undertake investments designed and implemented by the community (see Box 14). 205. Under the Thailand-United Nations Collaborative Action Plan (Thai-UNCAP), numerous United Nations agencies, including the UNDP, UNICEF, and the Food and Agriculture Organization have undertaken community-led activities in pilot areas with special attention to crisis impacts. Several bilateral donors have grant programs which fund community-based activities, such as AusAid's Small Activities Scheme, the Canadian International Development Agency's Canada Fund and New Zealand's Small Projects Fund. 206. All these initiatives have one common ingredient - strengthening the decision- making capacities of local communities; providing them with an opportunity to be heard; listening to their demands and understanding that in Thailand, the people demand an opportunity to help themselves. Institutional Support 207. A number of actions taken by Government also recognized the need to establish institutional mechanisms of support. Providing financial support to communities has been the initial focus, but the enabling environment for community organizations also must be strengthened. Below are some of the key initiatives. 208. The Ministry of Labor and Social Welfare has established 19 provincial NGO Coordinating Centers which coordinate activities of NGOs working on social welfare and safety nets in each province. In addition, the Ministry has supported legislation that would strengthen the ability of civil society organizations to provide support in the areas of social welfare. There is a draft bill which has passed Cabinet and awaiting revision by the Council of State. 209. The Urban Community Development Office (UCDO) was established in 1992 with an initial grant of 1.25 billion baht (US$ 34 million), as a special revolving fund to support urban community development activities and provide low-interest loans to community organizations for emergencies, housing and income generation. Over half of Thailand's 2000 poor urban communities in 50 provinces are now UCDO members, linked together into 103 networks through a broad range of community development activities. Thailand 80Gi! ,'fonitort 67 Po vertv and/ Ptiblic Policy 210. A major step was the establishment of the Community Organization Development Institute (CODI) which was approved by Cabinet on July 5, 2000. UCDO has beer merged into CODI. The main objective of CODI is to help strengthen community-basec organizations through financial and technical support. CODI for the first time helps to define community based organizations which are legally eligible to receive direct financial support from the government. A capacity building support arm will be established with a more comprehensive database of community based organizations in Thailand. CODI will be a key institution bridging the gap between Government and civil society organizations - it will be an instrument of inclusion. Measuring Results and Other Challenges 211. An important and still unfinished element of the empowerment agenda is adequate monitoring of the outcomes and impact of interventions. This is inherently difficult, particularly on a national scale. Empowerrnent investments are strong on process, that is the participatory decision making that must be introduced or strengthened. while measures of physical achievement, such as cubic meters of concrete or number cii' graduates or immunization rate, are sometimes seen as secondary objectives. Othe r empowerment projects support unique community based activities without an obvious common output indicator. Many involve capacity building to make decisions, not the decisions on investments themselves. Thus, with social capital building (various forms of group formation and strengthening) as the objective, empowerment projects present challenges for conventional statistical treatment. 212. The Social Investment Fund and other projects include intensive feedback mechanisms, transparency enhancing procedures, and objective monitoring of programs by independent consultants. These generate useful reports on how to improve the desig.n and performance of the projects, usually from a community participation anid transparency point of view, but do not focus on maximizing outputs per se. The challenge for the future is to develop indicators of success that can be measured readily, aggregated across projects, and reported nationally. More daunting is the issue of empowerment impact measurement. This will involve calculating the impact of empowerment outputs on household incomes and expenditure, and on other key welfare measures such as health, education, family cohesion, and social gains in crime and drug abuse reduction. Those involved in community capacity building report these gains, and are confident that their interventions are key to the improved impacts in project communities that they observe. Such feedback is a source of strength to the communiry empowerment movement. For the future, the case needs to be made more systematically, so as to reach policy makers not yet familiar with empowerment and its advantages. 213. The next item for the empowerment agenda is to develop a more clear strategic view on targeting. Empowerment in Thailand, as practiced at the project level, has directed resources at rural and urban communities, usually ones that would be judged poor, but also others that are well organized, able to propose quality projects, and linked to community networks. Such groups are not necessarily from the bottom 20% of the income distribution, and in some projects, there is an overt attempt to build participation, Thailand Social lonnoitor 68 Po ievrv aind Puiblic Polici` voice, or social capital in a broad cross section of Thai society. Like many other social investments, building empowerment in some cases is best undertaken universally, without overt targeting. The SIF in Thailand has targeted poverty on a regional basis (see Box 14), but more needs to be done however to measure SIF benefits at the household level. This question needs further research, both on the benefit distribution of existing and past empowerment projects, and on the varying impacts of such investments by income groups. Informal feedback suggests that the poorest benefit the most from empowerment investments. Such findings will help better define the targeting strategies appropriate for empowerment. 214. The third agenda item is empowerment and decentralization in Thailand, already noted in the chapter. In this early phase of public support for empowerment, resources have flowed outside official bodies to informal and non governmental community groups. Such groups have begun to work on local planning activities, but the absence of strong local government bodies has not allowed such efforts to develop popular voice in local government decision making. As decentralization efforts gather pace in Thailand, the empowerment agenda will need to shift attention to assuring popular voice in the deliberations of official civic for a that have control over the allocation of public resources. Thailand Social Nb aitor 69 Povterlv and Public Policy BOX 14: THAILAND SOCIAL INVESTMENT FUND: SECURITY THROUGH EMPOWERMENT The Social Investment Fund (SIF), launched in September 1998, marked the first time the Royal Thai Govemment channeled significant sums of money directly to civil society organizations. The general objective was to transform the crisis into an opportunity by supporting highly desirable reforms toward better governance, community empowerment, and the formation of broad de clopment partnerships among key elements of civil society. Since the launch of its operations, SIF has utilized a Targeting Map to help assist in allocating funds across every re:2 ion in the coantry. Each region was allocated a budget based on the following criteria: population, unemployment, seasonal unemployment and poverty, with the respective weights of 25%/o, 25%, 10% and 40%. Based on this criteria, the allocation to the Northeast, is highest at approximately 48.% of the tota] available budget. During the early implementation of SIF, recognizing that certain groups had "slipped through the cracks," the S., cial Fund Of'fice developed a new window of support in the early months of 1999 to finance social assistance to the needy. This new window or Menu 5 was designed to respond to the urgent needs of the poor and to increasing demands on organizations struggling to assist them, particularly those groups on the margins who cannot access regular services (i.e., hill tribe communities; unregistered families; communities in remote areas). The new window finances social assistance transfers to the most vulnerable through cxommunity organization networks. This new window of support has not only allowed the Social Fund to reach the vulnerable more quickly, but it has also supported the strengthening of community networks and thus the core objective of SIF to build up the stock of social capital. The funding support provided from this new menu is channeled directly to the beneficiaries through community organization networks. Community organization networks are grouped according to geographical location, joint developmental activities, and development issues of local interest such as networks of small-scale fishing associations, or around social causes such as AIDS Networks or networks of community environmental protection groups. Community organization networks are responsible for the compilation of information gathered at the community organization level into subproject proposal packages, budget mmnagement, subproject implementation and the production of detailed reports of member organizations. The Social Fund enters into a contractual arrangement with these networks to implement Menu 5 sub-projects. The networks are then responsible for disbursing the grants to the intended beneficiaries within the communities. In practice, it has been found that the majority of the communities have dec: ded to turn these grants into a revolving fund in order to increase the number of potential beneficiaries over time. These community based funds support student fees and materials and start up cost for income generating schemes, while the support for indigent families and AIDS patients often is in the form of an outright cash transfer. The Menu 5 beneficiaries include (i) unemployed homeward migrants; (ii) the indigent; (iii) poor farmers; (iv') homeless clhildren, disadvantaged children, neglected children, and school drop-outs; (v) battered women and women impacted by the social CTisis; (vi) neglected AIDs/lIV patients; (vii) neglected senior citizens; (viii) the handicapped that need care providers; and micx) patients with chronic illness. Responding rapidly, it took the Social Investment Fund only three months to design Menu 5 procedures. In all, 457 sub-projects worth about $50 million were approved between April 1999 and July 2000 and approximately $40.3 million has been disbursed to date. More than 300 community organization networks have participated in Menu 5 activities, with approximately 538,414 individuals benefiting from Menu 5 support. The Social Fund Office has managed to mobilize a large number of volunteers all over the country, including indis iduals from the NGO community, Government civil servants, academics, physicians, teachers, and religious leaders to help prepare, review, screen, anid help implement projects. The commitment of so many individuals from a wide range of backgrounds has been quite 1atonishing. The SIF has managed to attract close to 2,000 registered volunteers as well as hundreds of others who have not registered. All of them put in long hours without receiving compensation for their invaluable support. The SIF is widely recognized in Thailand as a major element of the Government's crisis alleviation strategy and a pathway toward government collaboration with CSOs. In Thailand, there are alternatives to Government for delivering social protection (security) programs to the poor. C ivil society organizations are substantial and growing, and during the depths of the crisis they stepped forward with the SIF to target assistance where it was most needed. The costs of managing these efforts were contained by the large volunteer response. The success of this temporary program contains lessons for the future management of Government social assistance in particular the benefits of working vwith civil society organizations in the communities to manage and deliver social assistance to those in need. Thailand Social Afolifor 70 Poa er/v andt Puiblic Policl Chapter 6. Protecting and Investing in the Poor 215. With the rapid growth of the Thai economy during the 1980s and up until the mid-1990s, poverty fell dramatically, and the government had little interest in focusing much attention on poverty-reduction programs. A limited number of programs were in- troduced both to protect Thai families from sudden shocks to their livelihoods and to in- vest in the capacities and assets of the poor. Taken together these programs, aimed at protecting and investing in the poor, did not account for a large portion of government expenditure. 216. In the domain of social protection, Thailand has no permanent income mainte- nance program, but does have various forms of social insurance. A compulsory social security system was introduced less than ten years ago when the government passed a law requiring large establishments (with 20 or more workers) to participate in the state-run social security system. The system, which covered maternity benefits, illness and death benefits in and out of the work place, and limited disability benefits, was expanded in the aftermath of the economic crisis (in late 1998) to include pension and child allowance schemes for private-sector employees. Public employees are covered by the Civil Ser- vants' Pension Scheme and the Civil Servants' Medical Benefit Scheme. Many large pri- vate firms and establishments have also operated their own private pension systems. However, the number of Thai workers who are covered by these public and private social security systems is very small,36 which leaves the government-run safety-net programs as the major source of official (as opposed to family and community) assistance to the the poor and the indigent. 217. The government safety net system in Thailand can be divided into three catego- ries:37 cash transfer programs, in-kind transfer programs, and income-generation pro- grams. The Department of Public Welfare in the Ministry of Labor and Social Welfare operates several cash assistance programs, such as the direct cash assistance to needy families, the monthly cash assistance to the elderly without any means of support, and village community funds administered by village welfare committees to help poor village residents. The in-kind transfer programs include the School Lunch Program, adminis- tered by the Ministry of Education, and the Free Medical Service for Low-Income Fami- lies program, operated by the Ministry of Public Health. Finally, there are wage- employment creation programs that are open to the population at large within a given area, such as the Rural Job Creation program, The Green Earn Program, the Tambon De- velopment Program, and an array of job creation programs expanded during the crisis. The wage-employment schemes essentially finance rural work projects in the rural areas, such as construction and repair of rural roads, weirs, school buildings, and irrigation ca- 36For instance, the Social Monitor IV noted that only 15% of Thai workers (formal and informal) reported being covered under the social security system, with the coverage strongly biased toward high-wage work- ers who are employed by large, formal-sector establishments. Indeed, as rules currently stand, only work- ers who are paid more than the minimum wage are eligible for social security coverage; so the lowest-paid workers are automatically excluded from program participation (World Bank 2000). 37This section draws from Krongkaew (1999). Thailand Social 'I.onitor 71 Po l ertv and i'uhlic P'olicv nals. The objective of these projects is to provide short-tern employment relief to the poor. 218. Social safety net and social insurance schemes can be considered the mainstay of the government's protection programs. Programs to enhance opportunities for the poor include investments in health and education as well as various growth-oriented policies, such as fiscal and trade policies, that have over time yielded the high growth rates ancL dramatic reductions in poverty seen in Thailand over the past 30 years (see chapter 4). 219. At the level of operational projects and programs, the government has finance(i many programs investing in the poor, most notably education and training programs that are offered by the Ministry of Education, the Skills Development Department and Social Welfare Department of the Ministry of Labor and Social Welfare, the Bangkok Munici- pal Administration and others. Although education programs are universal and not tar- geted to the poor, there has been a steady expansion of school enrollment and completion rates among the poor in Thailand. Micro-credit or small farmer credit programs constitute another important anti-poverty intervention. These have been financed by the Bank for Agriculture and Agriculture Cooperatives, the Urban Community Development Organi- zation, the Rural Development Program (now under the Community Organization Devel- opment Institute), and, more recently, the Peoples' Loan program launched by the Gox- emnment Savings Bank. The Community Development Department of the Ministry of Interior supports the Poverty Alleviation Program, also designed to make credit available to the poor. The Ministry of Agriculture and Agriculture Cooperatives sponsors extension and technical support programs targeted to poor farmers living in low-productivity areas, 220. Annex A contains a listing of major government programs that can be considerecd targeted to the poor, with the total expenditure on each of these programs during 1993-9'3. Most of these are targeted by design and objective, but others are included that success- fully target the poor even though that is not their stated objective. The following secticn analyzes the public expenditure patterns on these programs, after which the chapter fo- cuses on the performance of several of the larger protection and investment programs on which data are available from the SES. Government Expenditure on Anti-Poverty Programs 221. An important concern is the size of the government's anti-poverty effort, as measured by the total amount spent on public assistance programs in relation to various economic indicators.38 As Figure 43 shows, aggregate government expenditure on prc- grams primarily directed to the poor has increased significantly in real terms over time: 38Total government expenditure on poverty programs is not routinely compiled or reported by government documents. The data reported here were compiled by the World Bank Office in Thailand from government expenditure documents and the Bureau of the Budget. For the purposes of this calculation, poverty spendi- ing includes expenditure on public programs that are primarily intended for the poor or which unintention- ally (and disproportionately) reach the poor (in the opinion of concerned Ministry officials). A total of 52 such programs across all Ministries and Departments were selected as poverty programs. However, public spending on universal programs such as basic education and primary health care (that may disproportion- ately benefit the poor) is not included in this measure of anti-poverty spending. Thailand Social kJojnitor 72 P()0erit'7 and PIublic Polic, from Baht 4.5 billion in 1993 to Baht 21.1 billion in 1999 (in constant 1988 baht). Since the number of poor has generally fallen over this period, public spending on poverty pro- grams per poor person has also increased significantly - from a mere Baht 386 in 1993 to Baht 2,138 in 1999, implying an impressive annual growth rate of 33% over the six years (Figure 43).39 Since real GDP grew by 2.4% - and real total government expenditure at 8.1% - annually over this period, public spending on poverty programs increased as a proportion of GDP and as a proportion of total government expenditure as well. 222. At the same time, it is Figure 43 important to note that these Government expenditure on anti-poverty programs, 1993-99 large increases came about from 2,500- --O-Realgovt eaponanti-poverty 2248 26 -l a very small base, and that, de- programs per poor person 38 9 spite the growth in public 2,000 6As % oftotal govt expenditure 8 spending on poverty alleviation, ---As % ofGDP 7 overall public spending on pov- 1500 6 erty interventions was a mere 0.7% of GDP in 1999 (Figure 4,000 971 40 42 4 43). Additionally, the data show 273 that, while government real ex- 1 s penditure on poverty alleviation ... 386 E 0 2 increased by 5.2% between 0.2 03 0 3 os 07 07 1 1998 and 1999, the population 0 e 2 _ _ 1 9 of the poor swelled by 25.3% over the same period, resulting in a real decline of 16% in public spending per capita on poverty. 223. While 0.7% of GDP may seem like a small number, it is large in relation to the income share of the poor in total national income. The 1999 SES indicates that the poor (who accounted for 16% of the national population) enjoyed a share of only 2.8% of ag- gregate national income. Thus, if all of the public spending on poverty programs were to reach the poor (and only the poor), it would represent about one-quarter of their income - not an inconsequential sum. 224. Needless to say, the quality of public spending on poverty is as important as the quantity of public spending. There is a wide perception in Thailand that a large portion of the government's expenditure on poverty programs is wasted owing to poor targeting, selection of the wrong types of poverty interventions, and inefficiency in execution of poverty-alleviation projects. Further, insufficient attention has been devoted to monitoring and evaluating the effectiveness of the various government poverty programs in achieving their objectives, with the result that little is known about how much of the government's spending on poverty reduction actually reaches the poor and how much, if at all, it reduces poverty. 39Note that real government poverty expenditure per poor person declined between 1998 and 1999 due to a large increase in the number of poor persons - not because of a decline in aggregate public expenditure on anti-poverty programs. Thailand Sociul -A fJonito 73 Povetriv and P'uiblic Policv 225. The ultimate test of Total government expenditure and average household success of an anti-poverty living standards across provinces, 2000 program is the extent to 100 which it improves incomes e 8 of the poor and reduces 9 96 poverty. Unfortunately, at 9 * 2 94 this time, there are no E9 household survey data that C 92 * can be used to evaluate the c 90 poverty or income impact E.8 of the government's spend- 9 86- ing on anti-poverty pro- 4 grams. However, in 1999, 998 100 10.2 104 10.6 10.8 11.0 11,2 114 116 the National Statistics Of- Log real household e;penditure per capita (Baht) fice added a special 'crisis' Figure 44 module to the Socioeconomic Survey that included a number of questions on any benefits received by the sample households from selected government welfare programs.40 These data offer one of the very first opportunities in Thailand to examine the actual coverage of the poor by selected anti-poverty programs as well as the benefit incidence of these programs. While these issues are analyzed and discussed in the following sections, it is important to note at the outset that coverage and targeting are merely two of many indicators of program impact. There are many other indicators - such as the volume and quality of actual benefits paid out by these programs to the poor and, more importantly, the extent to which these pro- grams affect income, health, nutritional and schooling outcomes of the poor - that cannot be addressed in this Monitor with currently-available data. Hopefully, future surveys will collect data that will permit analysis of these aspects of program impact. 226. Before analyzing the various targeted anti-poverty interventions, it may be useful to examine the extent to which the inter-provincial allocation of overall public spending, responds to provincial differences in living standards. Using data prepared by the NESDB Macro and Social Division, Figure 44 plots total government spending per capita in a province against average living standards per capita in that province. It shows that better-off provinces tend to receive significantly larger allocations of per capita public spending than poorer provinces. While this is not an unusual finding (and reflects the facil that local governments in better-off provinces are able to raise more revenues and thus 40The SES has been normally undertaken every two years since 1986, with data collection being spread over a period of twelve months. The 1999 survey, done between the regular 1998 and 2000 surveys, was a special survey conducted only for a period of four months (June to September 1999) to assess the impact of the economic crisis on Thai households. The sample size for the SES 1999 was 7,789 households. A spe- cial module on who benefits from the most important government programs was included in the SES 1999. The respondent household was asked if it currently (or in the last year) received benefits from several gov- ernment programs, including the low-income medical card scheme, the health insurance card scheme, the free school lunch program, the free supplementary food program, government scholarship and loans pro- grams, the social security program, and the social pension program for the elderly. For programs that are targeted to individuals in the household (e.g., social pension for the elderly and educational scholarships), the identity of the respondent was also recorded. Thail/and Social Ao)nilor 74 Poiv'rw df lLl 'uhlic Polici, finance their higher expenditures), it does suggest that there is substantial scope for cen- tral government spending in Thailand to be used more strategically toward poverty- reduction goals. The goal of public spending, especially by the central government, should be to compensate poorer provincial governments for their lower capacity to raise revenues and finance public and social services. Programs that Protect the Poor 227. In the following two sections, a number of poverty and other social program are analyzed in terms of their uptake or utilization by the poor vs. other income groups. Us- ing the SES data base for 1999, the analysis allows an estimation of coverage of the pro- gram, nationally and by income group, and the relative share of the poor vs. other income groups in total use of the program services. Future studies with more complete data can extend this analysis to a full public expenditure incidence analysis of key social pro- grams. 228. The discussion in this chapter is not meant to suggest that universal (i.e., non- targeted) public programs and public policies that do not have the specific goal of reduc- ing poverty or helping the poor are of no relevance to the poor. On the contrary, some universal programs, such as provision of basic education, primary health care, rural roads, and communicable disease control, can have large impacts on poverty and the poor. In addition, fiscal and trade policies can have significant direct and indirect (via economic growth) effects on poverty and inequality. Policies that promote deconcentration of in- dustry - e.g., rural industrialization - can also significantly reduce income inequality and poverty. However, it is beyond the scope of this report to undertake a detailed assessment of such programs and policies. 229. Health Programs. Most Thai families participate in one of the many free or partly subsidized public health coverage schemes, ranging from free health services to the uninsured to various insurance schemes that require some beneficiary co-payment or premium. Four main schemes - the public assistance scheme, the civil servants' medical benefit scheme, the compulsory health insurance scheme for formal sector employees, and the voluntary health insurance program for the near-poor - receive public support. Administrative statistics indicate that, in 1998, 45 percent of the population was eligible for free medical care under the public assistance scheme (which includes 13.5 percent of the population covered by the low-income health card scheme), 11 percent under the Health Welfare for State Employees' scheme (including the Civil Service Medical Bene- fit Scheme), 8.5 percent under the compulsory health insurance programs (viz., social se- curity and workmen compensation fund), and 16 percent under voluntary health insur- ance programs (viz., the voluntary health card and private insurance). 230. Low-Income Health Card. The public assistance scheme for health care covers low-income adults, children under 12 years of age, the elderly (60 years and older), dis- abled, monks and war veterans. The low-income card program is a part of the public as- sistance scheme and is targeted to poor adults within the 13-59 years age group, with a budget of Baht 273 per capita. The card, which entitles poor adults to free health care at Thailand Social MAonionor 75 Pioi,tertw and Ptublic Policl hospitals and public health centers, is issued for a period of three years, and the incotrme ceiling for eligibility is Baht 2,000 per month for a single person and Baht 2,800 rper month for a family. The community leaders (e.g., Coverage and incidence of government health programs, by real per the village head) identify capita consumption quintiles, 1999 who is poor, thus deteirmin- 60 CPoorestquintile ESecondquintile OThirdquintile OFourthquintile *Richestq.intil,? ing eligibility for the card. 505 During the economic crisis, 43 the Government expanded 40 38 34 the coverage of this low- 30 24 * 2 23 income card to the unem- 20 19 18 ployed, provided they had 1 12 registered themselves as '3 8 unemployed with the Min- 0- istry of Labor and Social %o'uuaio shraeogal % fpouato %saeaong all receiving benefit beneficiaries of receiving benefit beneficiaries of Welfare. program program Low-Income Health Card Voluntary Health Card 231. According to the F SES 1999 data, only about 10 igure45 percent of the population reported having the low-income health card - somewhat lower than the coverage of 13.5 percent indicated by the administrative data. Households w)ith the low-income card had 2.7 adults in the 13-59 years age group. Just under a fifth of the population in the bottom quintile, based on real consumption expenditures, had a low- income health card. Nominal per capita monthly income of recipient households wZas Baht 1,368 - significantly less than one-half that of non-recipient households. The distri- bution of the low-income health card is progressive, with the poorest consumption qulin- tile accounting for 38 percent of all beneficiaries and the top quintile Box 15: Impact of the Crisis: Vulnerability of the Poor accounting for only 3 percent (Fig- "...The crisis has happened so quickly it has left us con- ure 45). fused, puzzled and let down. We have lost our jobs but are given no explanation," says a community leader from the 232. The regional distribution of slums of Khon Kaen, Thailand. "It was the rich who bene- cards, as based on the household fited from the boom but we, the poor, pay the price of the crisis." Within her community there is a feeling of uncer- data, appears biased toward the tainty, insecurity, and isolation. "Even our limited access poorest region - the Northeast - to schools and health is now beginning to disappear. We with over one-half of all recipients fear for our children's future," adds her husband. Pocr based there. Virtually no cards families report having to pull their children out of school were reported in Bangkok, the to work and a mother says, "What is the justice in sendi-ig our children to the garbage site every day to support the richest region. family?" - Thailand 1998 233. While the low-income Source: Narayan, Deepa, with Raj Patel, Kai Schafft, Anne health card program is progressive Rademacher, and Sarah Koch-Schulte, 2000, Voices of tire, in that the poorest quintile's share Poor: Can Anyone Hear Us? New York: Oxford Univer- of beneficiaries is nearly two times sity Press. its population share, the fact that Thailand Social !liOflitor 76 Po 'ierti, and] Public Poli'cy the outlay on the program is small makes even better targeting to the poor necessary.41 As it now stands, more than a third of the beneficiaries of the low-income card program are drawn from the top three quintiles. This effectively means that coverage for the poor- est quintile is low - less than 20 percent. 234. More important than the mere possession of the low-income health card is the ex- tent to which card-holders are actually able to obtain quality health services, when needed, without any payment. Unfortunately, the survey contains no data on household utilization of health services or the payment made for health services, so it is not possible to address these issues. Indeed, as noted below, there is a hint in the data that the benefit package associated with the low-income health card might be perceived as being inade- quate by the poor. 235. Voluntary Health Card. As noted earlier, there is also a voluntary health insur- ance card scheme in Thailand, under which a cardholder is entitled to free medical care for an annual contribution of Baht 500. This program aims to serve the near-poor and those in the population who do not have mandatory insurance, such as civil servants and formal-sector employees.42 236. Demand for the volun- Lorenz curves for beneficiaries of government health programs, 1999 tary health insurance card in- 100 creased sharply during the cri- 90 sis period, even more so than R0 that for the low-income health E, / card (World Bank 1999). The . 60- distribution of the voluntary S 50 health card is significantly less ,. -Proportionaltopopulationshare progressive than that of the - Low-income card low-income health card (Figure 20 -Voluntary health card 46). This is to be expected, as / the voluntary health insurance I card is available, by design, to D0 1 20 30 40 50 60 70 80 90 100 a wider populati on . Figure46Cumulative % of population, ranked by per capita consumption expenditure a wide popultion.Figure 46 237. What is puzzling is that, at least according to the SES 1999 data, a significantly larger proportion of the poorest quintile is covered by the 500-baht voluntary health card than by the free low-income health card (50% versus 19%). If correct, these numbers would suggest that the poor do not take advantage of the low-income card despite being entitled to it, perhaps because they perceive the benefits package associated with the low- income health card to be much inferior to that obtained from the voluntary health card. Another explanation is that the per capita budget subsidy plus the co-payment to public hospitals for the voluntary scheme exceeds the per capita hospital revenue of the low in- 4'Fine targeting can, of course, entail higher administrative costs as well as undermine political support for the intervention. In such cases, it could fail to achieve better poverty outcomes. 42Civil servants are covered by the Civil Servants' Medical Benefit Scheme, while formal-sector employees are covered by private insurance, social security, and workmen compensation fund. Thailand Social .1ifonitor 77 Potverty and Puiblic P= 40- / .* ends up disproportionately 3- /3 benefiting the affluent 20- / / (Figure 49). In 1999, 36% 10 of all SSA beneficiaries 07. were drawn from the toD 0 10 20 30 40 50 60 70 80 90 100 it Cumulatice % of population, ranked by per capita consumption expenditt consumption quintile.I The SES data indicate that, among households that report having the card, the household head either works as an employee in the private or public sector (53 percent) or is retired (25 percent). A third of the recipients live in Bangkok and another 36 percent in the Cen- tral Region. 246. It should be noted that the Thai government plans to expand the social security program later this year to cover employees of companies with 10 or fewer employees. The expansion would add an additional 3.6 million workers to the program, boosting coverage to 9.3 million workers. Workers set to benefit from the program's expansion include those working in garages, restaurants, beauty parlors, and all independent ven- tures. By some accounts, domestic helpers will also be covered by the social security program. These moves will obviously go some way toward bringing low-wage employ- ees into the folds of the social security program. 247. Public Employment Programs. The wage-employment creation schemes were stepped up considerably in the aftermath of the economic crisis, and came to be known as the Miyazawa fiscal stimulus package, which was put into operation in April 1999. The program generated short-term employment for low-skill workers in the rural areas in re- habilitation of water supply, irrigation, and other public works. Some employment for skilled workers, mainly in computer-related fields, was also supported. In total, the Mi- yazawa package provided employment to 88,967 higher skill employees and to 3.5 mil- lion unskilled workers. These 3.5 million workers were employed an average of 18 days, which is equivalent to 319,182 person years. The public works program was meant to pay wage rates designed to induce self-selection of the poor into the program. The objec- tive was to spend the money quickly to stimulate the economy through job creation and 44It should be noted, however, that this is not a failing of the social security program per se. The program is relatively new in Thailand, and the history of social security programs in more developed countries sug- gests that initial coverage rates are typically low and are biased toward formal-sector employees who tend to be better off than informal-sector and own-account employees. However, over time, population cover- age of these programs expands and reaches into low-income and informal-sector groups. Th/ila n Sociul Vioni or 80 15o verl! anMd Puhblic Policyl productive investments, while at the same time cushioning the poor from the crisis and creating a foundation for future competitiveness. 248. In addition to the Miyazawa package, the Social Investment Project (SIP), co- financed by the Thai government, the World Bank, JBIC-Japan, UNDP and AusAID, was also put in place in late 1998. One component of the SIP involved supporting existing government programs aimed at providing jobs to the unemployed and the poor. Most of these programs involved creating jobs through the implementation of small-scale civil works (weirs, foreground dredging, rural roads and school renovation). Additional public employment creation activities were also financed from the government's own fiscal budget as well as from Asian Development Bank loans. In terms of scale, the Miyazawa package was by far the largest of the job creation interventions. 249. The special crisis mod- ule of the SES 1999 did obtain Coverage and incidence of public employment generation schemes, some information about house- by real per capita consumption quintiLes, 1999 hold participation in any of IJPoorestquintile USecondquintile OThirdquoiole OFourthquintile *Richestquintile these public employment 42 schemes. Unfortunately, the 40 survey only asked if any mem- 35 ber of the household worked on 30 a government- sponsored em- 2, 19 ployment program since 1 April 15 l3 1999, and if so, how many peo- ,0 ple in the household worked. 5 5 Unfortunately, the survey did o not ask who in the household % of pop receiving benefit %share among all beneficianes ofprogramr worked, what wages were paid, lblic employmentschemesl and how many days the indi- Figure 50 vidual worked on the program. 250. Data from the crisis module of the SES 1999 indicate that 1.1 million households participated in the various public employment schemes. More than one member from the same household may have participated in the schemes, and therefore this number may be closer to the administrative data on total wage employment created by the Miyazawa, SIP, and routine government programs. Another reason for the lower estimate is that im- plementation of these public works programs continued well into calendar year 2000, which was well after the 1999 survey was completed. 251. More importantly, the SES 1999 is the only source of data on the socioeconomic characteristics of persons participating in these wage employment programs. The data show that, among those in the poorest consumption quintile, just under a fifth of the households participated in this program (Figure 50). The participation rate declined to 8 percent for the next quintile and to just under 2 percent in the richest quintile. Looking at the distribution of beneficiaries, the program was well-targeted to the poor, with 42 Thailand Social Alonjior 91 P'o vertzv ancl Public Paolic l Figure 51 percent of the beneficiaries Lorenz curves for beneficiaries of public employment schemes, 1999 being drawn from the poorest quintile and only 5 percent 00 Proportmonl to population share from the richest quintile (Fig- 90 - / ures 50 and 51). 80 -Public employment .0 70 252. The level of targeting 60- achieved by this program iS 50 admirable, especially given ,, 40 that the targeting was E 30 achieved with minimal ad- 20 ministrative apparatus (i.e., t / through the payment of wage o rates that wee designed to 0 tO 20 ~30 40 s0 60 70 tO 90 tOC rates that were designed to Cumulative % ofpopulation, ranked by per capita consumptton expenditure induce self-selection of the poor into the program). This suggests that there may be considerable scope for using public employment programs as a mainstay of an anti-poverty program during future downturns in the economy. 253. One problem often cited with public employment programs is that they need con- siderable start-up time to be put into place. However, once established, the employment and income benefits of these programs can be immediate. This was the case during the Thai crisis of 1997-98, with the public employment program interventions coming rather late in the crisis. For example, the Miyazawa package began to be implemented only in April 1999 - more than a year and a half after the onset of the crisis and nearly a year af- ter the severest effects of the crisis were felt by the labor markets. But soon after its ini- tiation, it had already generated 63 million person days of work. This suggests that it may be useful to have public employment schemes as a permanent feature of a poverty- alleviation and safety net program. The schemes could be designed so that they could be expanded rapidly during times of economic crises and scaled back during times of strong economic growth. This would generally make for a swifter government response to eco- nomic downturns. Programs Investing in the Capacities of the Poor 254. In addition to pro- Box 16: Disparity in Education Budget Allocations grams offering security, a number of poverty programs "....Though the state provides free education for everyone, when in Thailand are intended to observing disparities of budget appropriated to schools in the create opportunities for the central and provinces (per head of students) - we find a reversion poor investing in their capaci- of the Robin Hood concept in public policy. Schools in the cen- poor invasetsti inTheseirncapac tral enjoy handsome financial injections..." ties and assets. These Include educational assistance pro- Comment of a participant during a TDRI Poverty Workshop, grams, various credit December 22, 2000. schemes, and general public policies to increase economic growth and redistribute incomes. ThailandS SoCiI AVonitlor 82 P0 l''rIl' and Ptblic Polil'c i Coverage and incidence of government school nutrition programs, 255. School Feeding by real per capita consumption quintiles, 1999 Programs. Thailand has CIPoorestqcontile NSecoodquinble OThirdquintile OFourthquitite RRichestquntile two main school feeding 60- 59 programs - a free school 45 44 45 lunch program and a sup- plementary food (school 40 35 milk) program, both of 30 28 21 21~~~~~~~~~~~2 , which are administered by 20- 1 16 the Ministry of Education. 10 Given their long term ob- i4 jectives of encouraging en- °o Am -I- - jective r of encouraging en- %ofchildren aged 6-11 %shaue amongall %ofchildrenaged 3-8 %shae amongall rollment of poor students, years eecn-ng benefi| beneficianes of program years recerving hnefit beneficianes of program these programs are pre- School Leach Pragram Sapplementary Food Program sented here under the "in- vestment" category, even Figure 52 though they might also be categorized as safety net "protection" programs for the poor. The school lunch program applies to children in primary school, while the supplementary food program (largely a free milk program) is open to pre-primary students and primary students through the third grade. The original idea behind both programs was to assist undernourished children (as measured by weight-for-age) in village primary and pre- primary schools in obtaining adequate food. But, over time, the school lunch program was expanded to cover all primary- and pre-primary school children from poor families, whether undernourished or not. The selection process of the target population in these programs is more arbitrary than that in the low-income health card program, as the teach- ers in each school decide which families are poor and which children are eligible to join the programs. For the school lunch program, the cost of each meal is pegged at about Baht 5, which is rather low for a nutritious lunch. 256. The SES 1999 data indicate that 29% of all primary school-aged children (aged 6 to 11 years) benefit from the school lunch program, while 47% of children aged 3-8 years benefit from the supplementary food (milk) program. Despite the arbitrary nature of the beneficiary selection process, both programs are highly progressive, with as many as 45% of children in the bottom consumption quintile receiving free school lunch benefits and the poorest quintile accounting for 54% of all beneficiaries of the free school lunch pro- gram (Figure 52). The supplementary food program is also progressive, although less so than the school lunch program. The share of the poorest quintile among beneficiaries of this program was 45 percent in 1999. 257. Student Loan and Government Scholarship Programs. An Education Loan Fund for the student loan scheme was established in 1996 prior to the crisis. The eligible bene- ficiaries include those studying at upper secondary and tertiary private and public educa- tional institutions with incomes below Baht 12,500 per month (World Bank, 1999). Ad- ministrative data show that the number of recipients increased more than four-fold be- tween 1996 and 1999 - from 148,444 to 675,614 beneficiaries (World Bank 1999). Thailand Social .fonaitor 83 Po%yertv aind Puiblic Policy 258. The SES 1999 data corroborate that the loan program is largely for those currentlY in upper secondary school (26 percent), university (17 percent), and vocational and tech- nical education (50 percent). The average age of the recipients was 19 years, and 57 per- cent were females. The data indicate that there were over 300,000 beneficiaries of th, student loan scheme in 1999. While this number may appear large, it represents a cover- age rate of merely 4.7% of upper- and post-secondary students. Given its target grout. the student loan program is not oriented toward the poor, and the beneficiaries are much more likely to be from the higher quintiles (Figure 53). Coverage and incidence of government educational assistance programs, 259. The scholarship by real per capita consumption quintiles, 1999 program is less regressive 30 - Poorestquintile *Secondquintile CThirdquintile OFourthquintile ERichestquintile than the student loan pro- 25 25 2524 gram, with 25% of all bene- 21 19 ficiaries belonging to the 20 16 1616 bottom consumption quin- 15 tile. However, the top three 10 quintiles account for 52% 6 5 4 of all students on govern- 0 ment scholarships (Figure % of upper- and post- % share among al I % of secondawy and % share among al I 49). It was noted in chapter secondary students beneficiaries of post-secondary beneficiaries of 3 that 900/% of university receiving benefit program students receiving program students in Thailand are Govemoent Scholarship Program Student Loan Program drawn from the richest two Figure 53 quintiles of the population. The relatively large leakage of student loan and scholarship benefits to the non-poor thus, reinforces the highly unequal distribution of higher educational opportunities in the coun- try. More obviously needs to be done not only on expanding educational assistance pro.- grams for the poor but in also targeting these programs much more narrowly to students from the poorest economic backgrounds. 260. Credit Programs. In many countries, micro credit schemes that enable the poor to borrow for acquiring income-generating assets are an important element of the fight against poverty. In Thailand, the Poverty Alleviation Project administered by the Department of Community Development in the Ministry of Interior is such a program Under this program, an amount of Baht 289,000 is provided to each village, to be used tco provide interest-free loans to poor households as seed money for investments in income- generating activities. The Government has begun implementation of a more ambitious project under which each village in the country will be provided a revolving fund of one million bath (Village Fund Scheme), also to be used for making loans to poor households for income-generating investments. Thailand,Social 1lonitor 84 Pou 7 rtv and Public Policv 261. Unfortunately, there is virtually no information in the Share of each real per eapita income quintile in total household (gross) Y ~~~~~~~~~~~~borrowing from the Bank of Agriculture and Agriicultural Cooperatives, SES on how the Poverty Allevia- 1996-99 (agricultural households only) tion Project has performed and how poor households have bene- i 60 fited from this project. However, M 01996 *1998 011999 the SES does routinely collect l information on household bor- Q 4 31 rowing from various sources, in- 5 Ho- 25 27 cluding the Bank of Agriculture 18 19 and Agricultural Cooperatives - 20 (BAAC). These data can be ana- m lyzed to examine how well tar- 0- geted government agricultural Poorest Second Third Fourth Richest credit programs are to the poor. Figure 54 Real per capita income quintile (among agneultural households) creit roram ar t th por.Figure 54 262. Relatively few households in the SES report borrowing from the BAAC. In 1999, for instance, only 2% of all agricultural households reported borrowing from the BAAC during the month preceding the survey. For those that borrowed, the average amount borrowed was large, amounting to approximately 4.4% of monthly household income. More importantly, better-off agricultural households appear to account for the bulk of BAAC credit. This is true of 1996, 1998 and 1999 (Figure 54). Indeed, the data suggest that the share of the richest quintile of agricultural households in total BAAC financing increased sharply from 25% in 1996 to 59% in 1999. At the same time, the share of the poorest quintile of agricultural households fell from 11% to 5%.45 263. Since only a small proportion of households in the SES report any borrowing dur- ing the reference survey period (past month), these results must be treated with caution. At the same time, the fact that all three SES surveys from 1996, 1998 and 1999 show that BAAC credit is strongly biased toward the better-off agricultural households suggests that the results shown in Figure 54 are not entirely spurious, and that they may be broadly representative. 264. There is another important implication of these findings. There has been some recent discussion in Thailand about granting debt (interest) relief to farmers. The results presented in this report suggest that uniform interest relief to all BAAC borrowers will benefit the richest agricultural households much more than poor households. If the main purpose of the interest or debt relief is to assist the poor, the relief program will need to be much better targeted to this group of borrowers. Policy and Research Issues 265. While Thailand's record at reducing poverty during the last decade or two has been impressive, the economic crisis has brought the issue of poverty back to the fore- 45The assumption being made here is that borrowing patterns during the reference month are broadly in- dicative of the total stock or portfolio of BAAC loans. Thailand Social 1oni)oto ;5 P()L'CrtV and u'ttblic ]'olier front. With economic growth faltering and the distribution of income worsening, the in- cidence of poverty increased sharply in the immediate post-crisis period and appears to have stayed at that level. Given that the macro outlook for economic growth in Thailand in the near term is somewhat guarded, owing to global uncertainties, distributional issues assume even greater importance in reducing poverty, as inequality mediates the relation- ship between growth and poverty. Viewed in this context, the sharp increase in inequal- ity between 1998 and 1999 is troubling, although it is not clear whether this was a one- time event due to the economic crisis or whether it is the start of a trend of worsening inequality over the coming years. 266. As Poverty and Public Policy is only a step toward a poverty strategy with man', analytical issues still to be addressed, caution is called for in drawing policy conclusion, from results obtained so far. Some preliminary conclusions, however, are possible from this study: * Poverty is highly concentrated in a few provinces in Thailand, most of which are in the Northeast (and a few in the South and the North regions). While the available data are not suitable for estimating poverty at the vil - lage level, early and tentative results suggest that poverty is also highlv concentrated in a relatively small number of villages in the country. Thi, means that geographical targeting of poverty interventions, such as an ap- propriately-designed village fund, to the poorest provinces and villages is likely to be effective in reducing poverty. - While poverty has generally responded well to economic growth in the past, the problem has been that growth has been far too concentrated in a few regions, especially in and around Bangkok. This has reduced the rate of poverty reduction in the outlying regions, particularly in the Northeast. While migration of labor from the poorer provinces to Bangkok has brought about some diffusion of the benefits of concentrated growth, there are significant costs of and limits to migration. Economic growth that is more dispersed and less centered around Bangkok would probably result in a more sustainable reduction in poverty in the future. * There is also some evidence to suggest that some of the poverty, espe- cially in the Northeastern provinces, is structural in nature. Structural poverty cannot be eliminated with growth alone; more direct anti-poverty policies, such as access to credit and education, may be needed in addition to economic growth. * The Thai government has an impressive number of anti-poverty programs in place, and public spending on these programs has increased sharply dur- ing the 1990s. Further, the distribution of benefits of these programs ap-. pear to be reasonably progressive, although overall public expenditure is mildly regressive on a provincial basis. The main issue with some of these programs is their low levels of coverage, with the result that a significant proportion of the poor are outside the purview of these programs. * Public employment schemes, which were used widely during the eco- nomic crisis as a short-term anti-poverty tool, appear to be the most suc- Thailond Sociul Mfonitor 86 Polerty ad Ptiblic Policv cessfully targeted poverty interventions. A strong case could be made for making such schemes a permanent feature of a poverty-alleviation and safety net program. The schemes could be designed so that they could be expanded rapidly during times of economic crises and scaled back during times of strong economic growth. This would generally make for a swifter government response to economic downturns in the future. * In contrast, careful thought needs to be given to an important initiative of the new Government with obvious potential to help the poorest Thais - viz., debt relief from government loans. Household survey data suggest better-off agricultural households account for the bulk of credit from the Bank of Agriculture and Agricultural Cooperatives (BAAC). Hence, uni- form (i.e., untargeted) interest relief to all BAAC borrowers will benefit the richest agricultural households much more than poor households. * Likewise, targeting the proposed Village Fund to the poorest villages in the country would be significantly more efficient and equitable than the current proposal of providing an identical amount of resources to every village in the country. Thadiland Social .AIonitor 87 Po v ertil and Piuhlic IJoliciL ANNEX A Government Expenditure on Anti-Poverty Pro nuams (in millions of curren baht), 1993-99 1993 1994 1995 1996 1997 1998 1999 All Income-Generation Programs 315.2 602.3 1,910.6 2,456.1 9,146.5 18,300.8 20,587.2 Poverty Alleviation Program 0.0 0.0 922.8 1,342.0 563.5 0.8 587.2 Job Creation Program(road construction) 315.2 602.3 987.8 1,114.1 133.0 0.0 0.0 Education Loans Program 0.0 0.0 0.0 0.0 8,450.0 18,300.0 20,000.0 All In-Kind Transfer Programs 5,421.7 7,925.8 8,629.3 11,006.8 7,395.6 4,947.0 12,538.1 School Lunch Program 819.9 1,832.7 2,570.4 2,633.3 3,764.8 2,425.4 2,364.6 - for pre-primary school 99.9 332.6 523.6 574.6 699.4 687.9 809.1 - for primary school 120.0 1,000.1 1,546.8 1,558.7 1,431.4 1,333.7 1,555.5 - Fund for lunch programs 700.0 500.0 500.0 500.0 1,500.0 500.0 0.0 Housing Programs 1,131.6 1,648.4 1,831.0 3,387.6 1,484.2 502.6 352.7 Urban Poor Development Program 500.0 500.0 0.0 266.1 0.0 0.0 0.0 - Housing Assistance Program 0.0 0.0 0.0 500.0 500.8 0.4 0.4 - Housing Development Program 330.8 704.7 828.8 552.8 300.9 171.6 2.0 - Relief for Congested Communities 300.8 443.7 1,002.2 2,068.7 682.5 330.6 350.3 Health Program for the Needy 3,470.2 4,444.8 4,227.9 4,985.9 5,768.3 8,417.7 9,820.8 All Cash Transfer Programs 0.0 611.7 913.6 1,226.3 1,787.0 118 1,,,,87.7 All welfare programs 0.0 611.7 913.6 1,226.3 1,787.0 1,820.8 1,687.7 - for children and youth 0.0 277.5 305.0 356.4 548.8 452.1 462.6 - for women 0.0 136.5 174.7 210.1 262.8 211.6 228.0 - for the needy 0.0 73.9 75.8 104.4 102.0 298.5 108.6 for the elderly 0.0 123.8 358.1 555.4 873.4 858.6 888.5 All Anti-Poverty Programs 5,736.9 9,139.8 11,453.5 14,689.2 25,581.6 33,988.9 34,813.0 All Anti-Poverty Programs (1988 baht) 4,476.8 6,778.3 8,062.1 9,943.5 16,637.6 20,113.3 21,164.8 Tha ilandS cial AJon;iulor 88 P(oyerv ain P'uiblic Polic0 References Barro, Robert J. 2000. "Inequality and Growth in a Panel of Countries," Journal of Eco- nomic Growth 5: 5-32. Constitution of the Kingdom of Thailand, B.E. 2540 (1997), Translation by the Office of the Council of State. Dollar, David and Aart Kraay, 2000. "Growth is Good for the Poor," Development Re- search Group working paper, World Bank, Washington D.C., March. Fields, Gary S., 2001. "Accounting for Income Inequality and Its Change: A New Method, with Application to the Distribution of Earnings in the United States," School of Industrial Relations, Cornell University, Ithaca, NY, July, mimeo. Foster, J., J. Greer and E. Thorbecke, 1984. "A Class of Decomposable Poverty Meas- ures," Econometrica, May: 761-766. Ho, Samuel P.S., 1978. Economic Development of Taiwan, 1860-1970, New Haven, Ct.: Yale University Press. Kakwani, Nanak and Ernesto M. Pemia, 2001. "What is Pro-Poor Growth?" Asian De- velopment Review, forthcoming. Kakwani, Nanak and Medhi Krongkaew, 1996. "Final Report: Establishment of Key In- dicators System for the 8th Plan Monitoring and Evaluation - Paper II: Specific Issues," DED, NESDB, Bangkok, mimeo. Kakwani, Nanak, 2001. "Pro-Poor Growth and Policies," paper presented at the ADB Annual Meeting Seminar on "Pro-Poor Growth: The Renewed War on Poverty," Hono- lulu, Hawaii, 8th May. Krongkaew, Medhi, 1999. "Thailand's Social Assistance to the Poor," paper presented at the Manila Social Forum, Manila, November 9-12. Lampietti, Julian A. and Linda Stalker, 2000. "Consumption Expenditure and Female Poverty: A Review of the Evidence," Policy Research Report on Gender and Develop- ment, Working Paper Series No. 11, Poverty Reduction and Economic Management Network, World Bank, April. Litvack, Jennie and Tripti Thomas, 2001. "Annex 8: Decentralization Strategies for Empowerment," draft note, PRMPS, World Bank. Narayan, Deepa, with Raj Patel, Kai Schafft, Anne Rademacher, and Sarah Koch- Schulte, 2000. Voices of the Poor: Can Anyone Hear Us? New York: Oxford University Press. Thlatilan1d Social A/lonitor 89 Po Le?rlv and Public Policy Ravallion, Martin, 1998. "Reaching Poor Areas in a Federal System," Policy Research Working Paper 1901, World Bank, March. Rawls, John, 1971. A Theory of Justice, Cambridge, MA.: Harvard University Press. Sen, A.K., 1976. "Poverty - An Ordinal Approach to Measurement," Econometrica, Vo.l. 44. Sen, A.K., 1992. Inequality Re-examined, Cambridge, MA.: Harvard University Press. Sl0k, Julie, 1999. "Thailand Country Gender Profile", East Asia and Pacific Region Gen- der Home Page, November. Transcript of NESDB Workshop on Poverty, December 22-23, 2000. UNICEF Office for Thailand, 1997. Children and Their Families in a Changing Thai So- ciety. Bangkok. Van de Walle, Dominique, 2001. "The Static and Dynamic Incidence of Vietnam's Pub- lic Safety Nets," World Bank. World Bank, 1999a. "Thailand Country Gender Strategy," Draft, East Asian and Pacific Region, September. World Bank, 1999b. Thailand Social Monitor: Challenge for Social Reform, World Bank Thailand Office, Bangkok, January. World Bank, 2000a. Beyond the Crisis: A Strategy for Renewing Rural Development ir Thailand, Rural Development and Natural Resources Sector Unit, East Asia and Pacific Region. World Bank Thailand Office. World Bank, 2000b. Thailand Economic Monitor, World Bank Thailand Bangkok, De- cember. World Bank, 2000c. Thailand Environment Monitor, World Bank Thailand Office, Bangkok, January. World Bank, 2000d. Thailand Social Monitor: Social Capital and the Crisis, World Bank Thailand Office, Bangkok, January. World Bank, 2000e. Thailand Social Monitor: Thailand's Response to AIDS - Building on Success, Confronting the Future, World Bank Thailand Office, Bangkok, July. Tlhailand Social 10fo7l/or 90 Po tertv and Public Policv World Bank, 2000f. Thailand Social Monitor: Thai Workers and the Crisis: Social Moni- tor, World Bank, Thailand Office, Bangkok, July. World Bank, 2001a. "Decentralization and Governance: Does Decentralization Improve Public Service Delivery?" PREM Note #55, June. World Bank, 2001b. Engendering Development: Through Gender Equality in Rights, Resources, and Voice. World Bank Policy Research Report. Washington, D.C. World Bank, 2001c. Making Sustainable Commitments: An Environmental Strategy for the World Bank. Washington, D.C. World Bank, 200 Id. Thailand Economic Monitor, World Bank Thailand Office, Bang- kok, July. Thailand Social .7lonitor 91