Thailand

The World Bank has upgraded Thailand’s income categorization from a lower-middle income economy to an upper-middle income economy in July 2011. This is due to Thailand’s progress in social and economic development, despite facing a number of financial/economic and political challenges.

After recovering from the "Asian Crisis" of 1997-1998, the Thai economy took off again. From 2002-2006, Thailand's growth averaged at 5.6%.

As such, Thailand has been one of the great development success stories, with sustained strong growth and impressive poverty reduction. In the decade that ended in 1995, the Thai economy was one of the world's fastest growing at an average rate of 8-9% per year. After recovering from the Asian Crisis of 1997-1998, the Thai economy took off again, with growth averaging about 5% per year in the period 2002-2007. Primarily due to the high rates of economic growth, poverty has been falling steadily since the late 1980s. Over the last decade, poverty has been reduced from its recent peak of 21% (a result of the 1997 crisis) to about 8% in 2009. Poverty in Thailand is primarily a rural phenomenon, with 88% of the country's 5.4 million poor living in rural areas.

However, benefits of Thailand's economic success have not been shared equally, with some regions—particularly, the North and Northeast—lagging behind the rest of the country in terms of poverty reduction. Furthermore, in 2010, Thailand's economic growth slowed because of global economic conditions and political uncertainty. However, Thailand's economic activity is gradually returning to normal, with quarterly economic growth rates now closer to the levels often seen before the global financial crisis began in 2008. For 2011 as a whole, the World Bank is predicting economic growth in Thailand of over 3.5%.

As a result of sensible economic policies, Thailand continues to make progress towards meeting the Millennium Development Goals (MDGs) and is likely to meet most of the MDGs on an aggregate basis. The maternal mortality and under-five mortality rates have been greatly reduced and more than 97% of the population, both in the urban and rural areas, now have access to clean water and sanitation. Nevertheless, there continue to be spatial variations with some regions and ethnic groups lagging behind, and there are some concerns about the environmental sustainability goal.

Over the past decade, the relationship between Thailand and the World Bank Group has changed from borrower-lender to primarily knowledge partners. Building on this approach, the 2002 Country Partnership Strategy (CPS) focused on diagnostic and monitoring work and a limited amount of implementation support for selected critical development issues. The current strategy for Thailand—expressed in an Interim Strategy Note (ISN)—was discussed by the Bank's Board of Directors in November 2010. The overall objective of the strategy is to assist Thailand in its continued recovery from the recent global economic crisis, as well as to help the country achieve a more inclusive, broad-based and sustainable growth that is supportive of political reconciliation.

During the last CPS period, the Bank provided a limited amount of financial support to Thailand with currently only one IBRD investment project—the Highways Management Project—under implementation. Originally approved in 2003 for US$82.4 million, additional financing (US$79.3 million) was approved for this project in 2010 to support Thailand's continuing efforts to expand highway maintenance and upgrading activities.

In 2010, IBRD also approved a US$1 billion Public Sector Reform Policy Loan, which is assisting Thailand in its recovery from the global financial crisis, as well as supporting institutional development in the public sector by: (i) improving the effectiveness of the public financial management framework through better governance and accountability; (ii) enhancing the skills and performance of the civil service; and (iii) improving the quality and timing of service delivery.

The Bank's core work in Thailand will continue to primarily consist of knowledge products and advisory services. The program will focus on two flagship reports that will tackle cross-cutting issues of strategic importance, specifically:

• The Public Financial Management Report that will focus on central-local fiscal relations and will assist the authorities to improve service delivery and the effectiveness of decentralization; and
  
• The Country Economic Memorandum that will help to assess potential different growth strategies for Thailand.

When appropriate, the Bank will provide financing in various forms, but it is envisaged that Thailand's demand for financial assistance from the Bank will be modest.

IFC PROGRAM

The IFC has a diversified portfolio in Thailand of approximately US$160 million, mainly in infrastructure, financial markets, and chemicals. As Thailand faces the challenges of becoming a middle-income country and as the authorities attempt to address the economic imbalances that underpin stability in the country, IFC's program is expected to increase.

The IFC program in Thailand rests on providing investments and advisory services that include:

1. Supporting Thailand's efforts to broaden its economic competitiveness to move beyond middle income country status. It will do this by supporting the transition to a high skills-based and service-oriented economy; strengthening and broadening the country's infrastructure; and increasing private sector participation in the banking sector to increase efficiency and competitiveness.
2. Promoting inclusive economic growth through activities that promote agricultural links between rural communities in the Northeast and Southern provinces to the market; expand infrastructure to rural areas; and increase access to formalized finance to rural and micro-borrowers.
3. Supporting environmentally and socially sustainable growth with emphasis on energy efficiency; cleaner production technologies; and development and commercialization of renewable energy.

The Bank's technical support and analytical work on the public financial management (PFM) framework—i.e., budget formulation, budget execution and revenue management—and service delivery and public sector administration has helped to shape Thailand's public sector reform program and helped to develop one of the strongest budget systems in the region. The Bank is also working with the National Anti-Corruption Commission to help strengthen their operational effectiveness.

Bank support to the National Telecommunications Commission (NTC) to issue new international internet licenses has greatly helped to increase market competition and reduce user costs.

Grant funding and other technical assistance support has been provided to help Thailand in the process of phasing out of Ozone Depletion Substances (ODS) as well as replacing chloroflourocarbons (CFC) chillers, therefore helping to mitigate not only ozone depletion but also greenhouse gas (GHG) emissions.

In education, the Bank is providing analysis to address a number of priorities in the sector, including to better understand the stagnation and decline in test scores in Thailand, and to improve the quality and relevance of higher education.

In the health sector, the Bank is providing assistance to the authorities in various areas, including in improving the effectiveness of public expenditures, implementing the health system reform agenda and helping to revitalize HIV/AIDS prevention efforts.

Numerous Bank studies have had impacts on policy, and have been incorporated into various strategic plans documents, like the National Economic and Social Development Plan. Two recent examples—"Thailand Investment Climate, Firm Competitiveness and Growth" and "Toward a Knowledge Economy in Thailand"—conducted jointly with the National Economic and Social Development Board, examined the country's investment climate, as well as the performance of key Thai industries, providing policy recommendations on how to strengthen Thailand's competitiveness.