Social Safety Net in Thailand: the Role of Government



Social Safety Net in Thailand: the Role of Government

By Shao Zhiqin

Abstract

Social safety nets are programs that offer protection to poor people by providing income through cash transfer programs, subsidies on staple foods and other items, employment through labor-intensive public works programs, and cash through targeted human development programs. After the crisis, Thai Government endorsed revisions to the 8th National Economic and Social Development Plan to better respond to the crisis and initiated many programs to solve the poverty issue with the assistance of international organizations. It has been proven throug data analysis that those policies of Thai government are effective in protecting the underprivileged groups of people and those affected by the crisis in the areas of social welfare, education and health, especially in minimizing the effect of rising unemployment in urban areas. Even though Thai government has played a positive role in responding to the crisis, however, social safety nets and the larger social protection framework in Thailand have some gaps in instruments and coverage. According to the past experience and lessons, when designing new safety net programs, the government should take more concern with program sustainability, better target of programs and public policies to address the poverty problem, pay more attention to effective administration and good implementation of designed programs, especially the serous imbalance situation between rural and urban, as well as program designing methods.

Introduction

Social safety nets are part and parcel of social development. They constitute a process which enables the widening and deepening of people’s access to basic needs as a precondition for sustainable human development over time. Social safety net programs are crucial to ensure that all groups of the population have reasonable access to minimal income and basic social services in the event of diverse contingencies such as involuntary unemployment, old age or sudden economic crisis.

Generally speaking, in a market society, people will be rewarded according to the contribution created in the economy. The government may encourage people to protect themselves socially by participating in a privately run or nationally run social security system where the amount and the nature of social assistance depends on the amount of contributions they have made to the program. Those who cannot participate in the two-way system will fall into the social safety net programs of the government where the one-way, grant system will work. In developed economies, the government may have a permanent social safety net where its citizens are guaranteed a minimum level of well-being existence usually measured by the maintenance of a minimum income level. In developing counties, however, the government can only afford an ad hoc social assistance system where help is provided on a temporary or case-by-case basis. The ability of governments to provide permanent social safety nets is often a reflection of its developed status. An inability to provide social welfare is harmful to the development of the economy. The role of the government therefore is to ensure adequate protection for citizens. It does not necessarily have to finance or implement the programs entirely by itself. There are variable ways in which other actors, including beneficiaries, employers and financial institutions, can be involved. Governments, however, have to provide the necessary legislative and regulatory framework.

Over the past few decades, a number of Asian countries have successfully created jobs and reduced poverty through high economic growth. But the financial crisis has reversed many of these gains. Over 20 million workers are estimated to have lost their jobs and many more to have fallen into poverty. These days, in most Asian countries, people are still plagued by high levels of unemployment, underemployment and poverty. The main issue is very low coverage. Conventional systems of social security apply to less than 20 per cent of the labor force. It has been assumed in the whole region that statutory social security systems would steadily be extended to cover many more people, but this has not happened.

The Asian economic crisis has clearly demonstrated the need for stronger institutions and policies for the protection of vulnerable people. Now many Asian countries are paying closer attention to social safety net programs in general, recognizing that labor markets function better when assisted by appropriate institutions, such as "agencies for re-employment" or various innovative arrangements between labor and management.

In Thailand, the onset of economic crisis, which has brought about keen concerns for the welfare of the poor, caused the poverty rate rise, making it harder for the government to find solutions for the plight of these poor people whose number has increased dramatically. The result of the crisis show itself in forms of sudden contraction in economic activities, employment lay-offs, and overall loss of income through out the whole country. The loss of income and welfare in a country like Thailand where the social security system is still underdeveloped has given rise to the need for the so-called social safety nets, especially those under poverty line.

In a competitive economic system like Thailand, people are expected to look after their own welfare. However, Thailand does not have permanent income maintenance program. The two-way compulsory social security system became operational only in 1991, when the government passed a law requiring large firms with 20 or more workers to participate in the state-run social security system. This social security system, which covers illness, death, in and out of the work places, maternity leaves, and invalidity, is expected to expand its operations to cover larger contingencies such as old-age pensions and unemployment benefits in the near future. Since 1998, the public sector itself has converted its pension system from full state-support pension system to private-support insurance-based pension system whereby new and most public servants who are already working in the government bureaucracy are enrolled in the Pension Fund for Government Officials. During this period, many large private firms and institutions have also started to operate their own private pension systems. Of all the labor force in Thailand at present, more than 30 million economically active persons, those covered by the public and private social security systems are still quite few. Thus, social safety net programs initiated by the government have become more urgent for the poor and the needy.

There are many social programs initiated by the Thai government after the crisis. This paper has selected some of the programs for case analysis, evaluation and arranged them in three categories: programs in response to the crisis, programs at present times and programs in the future which is mainly focused on some suggestions.

Supervision of Social Safety Net Programs in Response to the Financial Crisis

Social safety nets and the larger social protection framework in Thailand have some gaps in instruments and coverage. On the eve of the crisis, Thailand’s social protection system did not include those instruments common in OECD and Eastern European countries, such as unemployment insurance, a pension scheme for the private sector, and large scale transfer programs for the poor, such as food stamps, transfer entitlements for the indigent, and so on. The onset of the crisis has been a period of intense scrutiny of the existing gaps in the social protection framework. The government had to ponder hard as how to address them.

(1) Income and employment generation programs. In order to provide comprehensive assistance to the poor in the aim of creation of employment, provision of training, and access to improved health services during the crisis, as well as building long term social capital in Thailand, the Thai government has launched one of the largest programs of social safety nets. The ambitious program entitled Social Investment Project with a total cost of $462.2 million was supported by the World Bank and other donor agencies including the Asian Development Bank(ADB) and the United Nations Development Program.

This large project consists of two components. A Regional Urban Development Fund and a Social Investment Fund. The Regional Urban Development Fund was set up with about $30 million. The money was disbursed in the form of loans to municipalities all over the country. The object of the fund was to help strengthen the physical infrastructure in the urban centers. Similar to the state projects, the immediate contribution of the activities to the alleviation of economic crisis will be the creation of new employment opportunities for the unemployed.

The other component namely, the Social Investment Fund, has gained the most attention. About $120 million allocated to this component was used to develop community-based projects to be initiated, planned and implemented by local people. The Fund was expected to benefit the people directly. The Social Investment Fund managed by the Social Fund Office under the responsibility of the Government Savings Bank mainly provided training and education for career development; created social welfare and community security; encouraged protection of environment and natural resources, as well as culture; and developed communities. Money was available as grants to projects, which catered to the needs of the poor including the jobless who returned to their villages. Those eligible for grants were active community organizations, community networks, and local administrations that worked with community groups and local institutions. Project proposals initiated by the above groups were to be screened by the Social Fund Office. The operation of the project started on September 9, 1998 when proposals from local communities were first accepted. After one year’s operation at the end of September 1999, the project terminated.

According to the report of SFO, 7,181 applications were received and 5,291 (73.68 %) were eligible. Of those eligible, 883 (16.69 %) had been approved with the total budget of 508 million baht. In terms of distribution, the subprojects covered all 73 provinces of the country and 1,280 communities as beneficiaries. Table 6 shows the distribution of the projects in terms of category and fund allocation:

Table 1: Statistics on Social Investment Fund Projects Distribution

|Category of subprojects |Number |Budget(million baht) |

|Total approved |883 |507.95 |

|Community economy |343 |123.27 |

|Community welfare and safety |201 |75.09 |

|Natural resource and cultural preservation and |53 |21.75 |

|management | | |

|Community capacity building/networking |220 |65.89 |

|Emergency community welfare for the needed |66 |221.95 |

|No. of communities being supported |395 | |

|No. of beneficiaries |36,937 | |

Source: Ms. Amara Pongsapitch, The Social Investment Fund Monitoring Framework.

In addition, the government took other policy steps to address the unemployment problem as it became clear from various sources that the incomes of the poor and near poor were declining. The Ministry of Labor and Social Welfare, for example, in cooperation with relevant ministries, formulated an Action Plan for the Alleviation of Unemployment Problems. It set forth seven measures to address the impacts of the crisis, including: immigrant labor; encouragement of Thai workers abroad; employment generation in rural areas; training for the unemployed; and employment preservation through support to labor-intensive and export industries.

(2) King’s new theory project. On December 4th, 1997, the King initiated the “New Theory” project. Based on the King’s direction, all concerned parties were involved in formulating strategies, mechanisms and measures for solving the basic problems of the rural poor. Basically, the New Theory stressed on the small-scale farmers’ roles in society. It stipulated that restoring and maintaining the strength of the agricultural sector is a necessary condition for reversing the economic downturn. And, the idea of self-sufficiency indicates that the local community must attain a certain degree of financial autonomy before it engages the market economy. The King was fully aware that no one would enjoy the sense of having enough without first attaining some degree of economic and financial independence. This new theory project can be seen as just another technique -- an ad hoc social safety net for the times of currency devaluation, financial bankruptcy, soaring unemployment, poverty, and a host of other social problems.

“New Theory” was a three-step community development method designed to serve as a guideline for attaining self-sufficiency for farmers. The first stage operated at the individual level. It highlighted the diversification of farmers' income by proposing the division of plots to support different economic activities. Then, the next two stages: the focus shifts to the strengthening of the entire community, and then to collaboration with the outside sectors. The second phase proposed that farmers form themselves into groups or cooperatives to help one another in the areas of production, marketing, education, social welfare and development, and religion. The third and last stage envisioned fair and equal partnerships between the private modern sector and the rural community.

According to the new theory initiated by the King, more than 40 million baht were allocated to some 8,000 small-scale farmers engaged in integrated farming. The scheme, a pilot project on new theory farming, was part of the agriculture ministry's plan to help laid-off workers who have returned to their rural homes. However, qualification was tough for candidates, who must have a firm commitment to sustainable farming as well as at least 15 rai of farmland. Each volunteer would be granted 5,000 baht to buy seeds and animals during the first year of the project. Local agricultural extension officials supervised and taught farmers farm management. Under the scheme, part of the farmland would be set aside for water storage sufficient for integrated cultivation and live stocking.

In order to monitor the project, the ministry of agriculture launched an intensive training program for officials who would monitor the project, as well as gave them instructions on the concept of new theory farming and participatory approach in working with farmers. In 1998 there were 8,630 Integrated Agricultural farms implemented, with participation by approximately 487,000 rural households. In 1999, the number of farms had increased by over 43% to 13,375 with almost 542,000 households now participating.[1]

(3) Scholarship fund and education Loan Programs. There were two effective education programs during the crisis. One was the scholarship fund. The Government allocated $25 million from the budget support provided by the ADB under its Social Sector Program Loan to provide grant scholarships to students in primary and secondary schools who had dropped out or were unable to continue their education or whose parents were laid off, and novices. As of early June 1999, over 328,000 students had received approximately 835 million baht. Given high demand, the funds appeared to have been rationed. The scholarship fund, which was designed as a one-year safety net to help poor students, was earmarked for students and applications were only available at schools.

The other is the education loan program. The Education Loan Fund for the Student Loans Scheme (SLS) was established in 1996, prior to the crisis, to expand educational opportunities for students from low-income families by reducing the parental burden of education financing. Eligible beneficiaries include those studying at upper secondary and tertiary public and private educational institutions with incomes above 150,000 baht per year. As a result of the crisis, much attention has focused on the potential role of the SLS in preventing school dropouts. Annual budget allocations and actual expenditures increased significantly over the past several years whether calculated on a fiscal or school year basis (in line with the ADB’s Social Sector Program Loan condition to increase the budget to baht 17,000 million by February 1998). The number of recipients increased more than four-fold between 1996 and 1998 (see Table 7).

Table 2: Student Loan Scheme Expenditures and Recipients, 1996-1999

|School Year |Budget |Actual spent (million baht) |No. of Loan Recipients |

| |(million baht) | | |

|1996 |6,000 |3,764 |148,444 |

|1997 |14,736 |12,515 |435,426 |

|1998 |18,250 |18,338 |675,614 |

|1999 |24,300 | | |

Source: Ziderman, 1999.

As with the scholarship program, loans were rationed, given the increased demand. Because the budget for new borrowers was fixed and the demand for loans increased dramatically, the average nominal loan size to new recipients decreased by 30 percent between 1997 and 1998.

Information to evaluate the success of all of these crisis response interventions, especially the effectiveness of targeting, and the extent to which they may be responsible for outcomes is not available. But the high demand for loans and assistance in meeting education-related costs, combined with the impact on enrollments discussed in the above, suggests their values. Moreover, action responses of the Education Ministry in the form of relaxed payment policies and expanded student aid have been appropriate, and appear to have helped. Of great importance for the future of Thai education is the commitment and creativity shown by school principals and communities in managing resource uncertainties.

(4) Expanding health insurance coverage Programs. In 1998, the government increased the budget for free medical care to help cushion the impact on the poor(see table 8). The Ministry of Health has received financing from the World Bank and the ADB to expand existing health insurance programs and sustain its level of services to low income patients at the provincial level. Free medical care or highly subsidized health care was available for low-income people.

Table 3: MOPH Free Medical Care’s Proportion in Some Selected Years

|Year |MOPH budget (million Baht) |Free medical care budget(million Baht) |% of MOPH budget |

|1984 |8,617.6 |659.7 |7.6 |

|1989 |12,167.4 |800.0 |6.5 |

|1995 |45,102.7 |4,273.5 |9.4 |

|1996 |55,236.2 |4,819.9 |8.7 |

|1997 |66,544.0 |6,370.0 |9.5 |

|1998 |59,920.9 |7,029.0 |12.0 |

Source: The Impact of Asian Financial Crisis on Health Sector in Thailand, Asia Development Bank, 2001

To alleviate the impact of the crisis on the most vulnerable, the government strengthened its support for the Public Assistance and the Voluntary Health Card insurance schemes. Financed by the World Bank, the MOPH sustained the subsidy to the Public Assistance scheme. The Government offered a program of free Low-Income Cards for the unemployed provided they register at the Ministry of Labor and Social Welfare. The Government subsidy to the Voluntary Health Card had been doubled (from 500 to 1,000 baht per card) and a loan from ADB had been used in 1999- 2000 to finance this increase. An additional 900,000 households purchased voluntary insurance (Voluntary Health Card or VHC).

Social security fund benefits were also expanded to include kidney dialysis in May 1999. The extended benefit would greatly assist fund members afflicted with kidney diseases and destined to meet the high costs of treatment. Kidney disease was one of 15 kinds of illness initially excluded from coverage by the fund. The social security board had agreed the fund would pay 1,500 baht per dialysis treatment. To be eligible, fund members must have received approval from an expert committee of the social security fund. Benefits covered the full cost of dialysis if patients went to state hospitals. Those who selected private hospitals would have to meet the balance of the cost from their own pockets. It was estimated that at least 100 of the 5.14 million fund members suffered from kidney disease. As of December 31, 1998, the social security fund totalled 67.5 billion baht and covered 93,093 enterprises[2].

Hence, the number of people insured was likely to have increased in absolute number, largely because of the increase in coverage through the Social Security and the Voluntary Health Card schemes. Among the 1.4 million unemployed expected to need low cost health insurance, few have taken the opportunity to enroll in the free Public Assistance Low-Income Card Scheme. Thai families, including the unemployed, seem to have preferred the cost-shared Voluntary Health Card Scheme to the fully subsidized Low Income Scheme, despite having to pay a small insurance premium.

However, the insufficiency of target subsidies for vulnerable groups remained an important issue. Over the two crisis years, the MOPH had attempted, with some degree of success, to better register the beneficiaries of the Public Assistance Scheme including Low-Income Card holders. But the Public Assistance Scheme covered all children and elderly regardless of the income level of the households. The Voluntary Health Card program, which was expanded during the crisis, did not have income-related eligibility criteria. This scheme was likely to have benefited the vulnerable near poor in the crisis. But part of the beneficiaries may have come from wealthier groups and therefore not in most in need of government subsidies.

Progress of Social Safety Net Programs at Present Time

At present time, social safety net programs in Thailand are focusing on poverty alleviation, job creation, income distribution and risk reduction and so on. Among these programs, job and income generation is impressive. The progress is evident. According to a recent report by the Statistic Office, unemployment has fallen during the past nine months to 2.1% of the workforce. As of Sept. 30 2001, the workforce totalled 35 million and increased to 1.1 million from the end of 2000. About 500,000 new workers, mostly new graduates, entered the labor market. The number of people employed was 34.1 million, an increase of 4.0% from a year earlier. Employment in the agricultural sector fell by 0.2% or 25,000 people as a result of seasonal factors and floods. Non-farm employment rose by 7.9% of 1.34 million people, in almost every sector, especially industry. Unemployment only reached its peak in 1999 at 1.77 million people or 5.3% of the total workforce. However, up to September 2001, the number of insured people in the Social Security Fund rose by 26,594, to 5.96 million.[3]

(1) Improvement of Social Security Schemes. In 1990, the Social Security Scheme(SSS) was introduced to reduce inequity in access to health care of different population groups, and to provide financial security to formal sector private employees. Social security Act came into force on March 1, 1991. The SSS is the primary safety net for industrial workers in urban areas. Employers, employees and the government must make an equal contribution to the fund of 1% of a workers' salary in 1998 and in 2001 employers and employees are required to contribute 3%, with state contributions unchanged. The SSS is administrated by Social Security Office(SSO) of the Labor and Welfare Ministry.

Along with the development of the society, the SSS keeps changing. In September 1993, the coverage was extended to enterprises with 10 or more workers. After that, voluntary insurance service, old age pension insurance and child allowance schemes were introduced. Up to now, the social security scheme was expanded to cover workplaces with five employees and more and those with more than one worker in 2005. The scheme will cover agricultural and fishery sectors in 2006 or 2007(see table 9). [4] To ensure transparency for the lending of money from the Social Security Fund to job-seekers via several banks, the government conducts a monthly follow-up on the program and revokes its contracts with any banks with poor performance.

Table 4: Planned Extension of Social Security Coverage in Thailand

|Year |Coverage Extended to |

|2001 |Employers with 5 or more employees |

|2003 |Employers with 1 or more employees, including self-employed |

|2006 |Agricultural sector |

|2007 |Fishery and forestry workers |

Source: Deloitte& Touche Consulting Group: Pension and Provident Funds Reform: TANo. 2955-THA.

However, there may be difficulties for the implementation of the plan for workplaces with one employee up since Thailand has at least 200,000 small and medium sized workplaces with high turnover of staff. Although reform is going on, Thailand’s social security system is not well developed. Most workers, poor and unemployed are not protected or have to rely on informal social safety nets. The undeveloped formal system suffers from serious weaknesses that derive from limited coverage (only 15 percent of the workforce), unclear structure, and the lack of a coherent social security policy.

In addition to the SSS, Thailand’s social security system has Pension Scheme and Provident Fund. As traditional family and community-level coping mechanisms have been strained by the crisis and with incomes so sharply reduced, much discussion has centered on the adequacy of existing unemployment assistance benefits and pension schemes. Formerly, pension benefits were available only to civil servants; only about 4,000 employers nationwide have established pension funds, covering about one million employees, less than 3% of the country's labor force, while some larger firms offered provident funds. Other benefits (medical, maternity, invalidity and funeral), but not pension, were extended to firms and their employees with at least ten employees. As a result of the crisis, the government extended the SSS benefits, for the unemployed from six to 12 months and reduced the tripartite contribution rate for such benefits by one-third, also made private provident funds compulsory to strengthen the country's social safety net. Private provident funds, considered the second-level of protection for labor, now have assets totalling about 170 billion baht. As for government workers there is the Civil Servants' Fund, now amounting to about 100 billion bath for its 1.1 million members. State officials and the government each contribute 3% of a member's salary to the fund.

(2) Job creation programs are still on the way. In 2001, with economic growth stalled and businesses compelled to cut costs further, the fall-off in exports due to the global economic slowdown and the constraints imposed by the current budget made rising unemployment a major concern. Especially in recent months, with tourism and export revenues declining steadily, particularly following the Sept 11 terrorist attacks in the United States, many analysts worried that economic growth next year would fall well below the 2-3% target set by the government. This would lead to higher unemployment, which in turn would compound the troubles for the economy through lower domestic demand and consumption. Unemployment became a growing problem(see table 10). Household incomes were reduced as economic growth slowed down, even though annual inflation was expected to remain low at around 2%. The income gap between the rich and the poor also widened.

Table 5: The Labor Force (unit: million persons)

| |1997 |1998 |1999 |2000 |2001 |

|Population |60,500 |61,174 |61,779 |62,405 |62,741 |

|Labor force |32,575 |32,450 |32,719 |33,224 |33191 |

|Employed |31,522 |30,105 |30,663 |31,293 |30,688 |

|Underemployed |0.573 |0.937 |1.201 |1.044 |1.062 |

|Unemployed |0.433 |1.413 |1.370 |1.194 |1.409 |

|% of labor force |1.513 |4.361 |4.183 |3.600 |4.245 |

|Looking for work |0.137 |0.457 |0.387 |0.318 |0.393 |

|Not looking for work |0.351 |0.957 |0.933 |0.875 |1.019 |

|Seasonal inactive labor force |0.564 |0.892 |0.686 |0.738 |1.095 |

|% of labor force |1.732 |2.749 |2.096 |2.220 |3.293 |

Source: National Statistical Office 2001. Note: defined as working less than 35 hours per week.

In response to this situation, the Thai government f allocated 58 billion baht for its emergency funds program to boost Thailand's ``economic engine'' and lay the groundwork for future growth. Then ``as a New Year's present for the public'', 16 billion bath was set in December 2001 to boost for property and generate jobs. The 58 billion bath- emergency stimulus funds were initiated for boosting growth and alleviating unemployment over the short term, helping spur overall economic activity. These measures were only temporary measures. If they failed, then the government had to adopt supplementary measures.. 16 billion baht fund would be directed at job training and skills development, particularly for new graduates just entering the workforce. Programs were proposed by different universities, with priority given to projects able to create a significant number of jobs or which could employ new graduates to do community work in upcountry provinces. At Chulalongkorn University, a broadly based skills development program began in November 2001. Courses consisting of 84 hours of instruction were given to unemployed new graduates in areas such as web site development, computer programming and English and food technology applications. 11.39 billion baht in funds went to19 projects aimed at creating new jobs, increasing job skills, developing new businesses and boosting welfare benefits for the unemployed. The programs were expected to help more than 900,000 people. [5]

The job programs had three objectives: to reduce unemployment, help the development of new businesses and encourage new jobs growth. About 100,000 people were expected to receive funds to develop new business initiatives. The program had additional effects such as helping spur the construction and building materials industry. It was projected to compliment efforts at improving the overall economy and boosting employment.

(3) 30-Baht health care scheme. The newly launched 30-baht medical care scheme was expanded to include all 75 provinces and 13 districts of Bangkok. The first phase of the scheme was launched in April 2001 in six provinces. It had been extended to another 15 provinces since June 1 2002. The main objectives of the scheme were to develop the country's primary health care system, and to encourage people to visit any health care units nearest to their homes. From then on, there would be three kinds of health insurance for Thais: the social security system, the medical welfare scheme for state officials, and the 30-baht medical care scheme. The 30 baht gold-card scheme covered people aged over 60, children below 12, disabled people, monks, and community leaders eligible for free medical services. The scheme would also cover those who had been without any kind of health insurance before, but this group would have to pay 30 baht per head per visit. However, the scheme did not cover all kinds of disease. Treatment services such as kidney dialysis and anti-retroviral drugs for HIV/Aids patients were not provided under the gold-card scheme.[6]

Compared with other programs like education loan, job and income generation projects, 30 baht health care programs have been blamed severely by the public after their implementation.

The project discussed above has three concerns: One is the budget. The government needs to invest up to 100 billion baht for the 30 baht health care project if it wants to guarantee universal health coverage for Thais within the year. The cost will rise by 2% each year plus inflation. In this fiscal year, up to 77 billion baht was allocated for public health projects. The government needed to find 23 billion baht[7] to fund the rest. The scheme would need two funds in the first stage. The first, to be expanded from the Social Security Fund, would cover government officials and state enterprise workers and their spouses and children. The second would cover others not protected under the first stage. Apart from effective cost and quality controls on service providers, an information technology system is needed to make the plan work. The money would be allocated from taxes. Raising taxes would be the last alternative. It is indeed a dilemma.

Second is the target problem. It is possibly the most ambitious universal health-care system ever attempted anywhere in the world. No targeting, no focusing, it provides every Thai with medical care for just 30 baht a visit. Everyone will have 30-balt’s treatment no matter poor or rich. Some poor people may need the treatment, but 30 balt absolutely is not enough for those whose illness are not covered by the scheme.

The third is asymmetric information. The large scope of the program requires an effective management scheme. The lack of information regarding the scheme makes the sustainability of the program doubtful. For instance, information about people’s behavior under this cheap program is unknown. Also, it is most important for the management of this scheme to inform the public about the program. With cheap medical care, for example, people must be informed that prevention is still the best cure.

The asymmetric information about medical services, the number of patients, and the information of hospitals especially those bigger and better-known ones under the strain of their services, is also a big problem of the scheme. The 30 baht scheme will work only if people follow the system as it is indicated that they should register with health centers nearest their home and will be referred to a district, provincial or central hospital according to their needs. Yet, almost certainly, people will try to register in the bigger and better-known hospitals. A huge workload and financial burden will be placed on these hospitals and they could crack under the strain or cut costs at the expense of their services.[8]

Social Safety Net Programs in the Future

The economic situation is not optimistic as mentioned in the previous section. The average income of the poor has dropped by 25 percent since the onset of the economic slump, while the cost of living has risen by 40 percent, according to a recent survey. The poor in Thailand number far more than the 11 million estimated by the NESDB. The number of people it defined as "poor" had risen by three million since the economic recession began in 1997. Rising unemployment and mounting social illness could spin out of control unless the government takes a more aggressive approach to dealing with the problems. Thus, the government faces huge challenges to establish proper social safety nets in the future, though obvious progresses have been made during the last few years.

Currently, households are struggling with unemployment, economic uncertainty, reduced public services, and higher prices. Most workers, the poor and unemployed have little formal protection and thus rely on informal social safety nets. While spurring economic recovery, therefore, efforts should focus on the poor and unemployed to secure social safety nets.

Some of the government's previous anti-poverty programs did not exploit the opportunity to reach the long-term poor. The major challenge for the government is to sharpen focus on the poorest and find ways to solve the deep-rooted problem at the village level. Block grants and other anti-poverty interventions targeted to the poorest villages are likely to be a better use of public funds than universally distributed programs. High growth rates had a dramatic effect on poverty rates in the '80s and '90s. And a resumption of vigorous growth could be essential to reversing these adverse trends. However, structural poverty among certain sub-groups and in certain areas may need more targeted programs and policies to help these long-term poor climb out of poverty. Education is the surest pathway out of poverty. In addition, the key attribute of society, family self-reliance and community-based support is definitely Thailand's important way against economic shocks. According to the past experience, the government should take more concern with these aspects when designing new safety net programs:

(1) Sustainability of programs. Before launching a new program, it should assess sustainability which involves focusing on issues such as the program’s fiscal prospects, the institutional arrangements under which the program operates, including predictability and good governance, the level of its public support, and distribution aspects. Potential future financial commitments under the program need to be evaluated to make sure that they can be borrowed from the resources likely to be available. Because usually the financing of social safety net programs tends to be uncertain as a factor in annual public budgetary decisions; furthermore, it is precisely when economic crises occur and public expenditures are cut back that higher allocations for social safety nets are required. In order to realize the social gains promised by social safety net programs, the continuity and predictability about the conditions under which benefits are to be provided and the approximate amount to be made available is also necessary.

(2) Target of social safety nets. Although safety net programs need to be devised to address both redistributive and risk reduction roles, different countries have specific conditions, which may dictate whether safety nets play primarily a redistributive or primarily a risk reduction role. Thailand needs to better target its programs and public policies to address the poverty problem, which is re-emerging as one of the nation's most serious issues in the wake of the economic crisis. Therefore, it is important to design programs to address the particular needs and characteristics of the poor.

Better targeting of public expenditure and a more efficient and forward-looking budgeting system will be the main tools. The overall government capacity for poverty-conscious decision making and evaluation needs to be strengthened. Particular attention should be paid to increased use of participatory approaches, and to transparent financing and delivery. The poor are not only poor because they lack money. But they are poor because they lack access to and bargaining power in attaining resources.[9] During the last few years several government projects to tackle unemployment had flopped due to poor publicity and slow implementation. Most workers rarely learned about state projects intended to alleviate their economic plight after they were laid off. Two-thirds of workers didn’t know about any government measure to help them when forced out of the workforce by the economic slump.

(3) Program administration. Successful social safety nets depend on effective administration and good implementation of adequately designed programs. Common operational problems among government agencies include corruption, cronyism and favoritism; inadequate information processing, storage and retrieval systems; and organizational cultures that are hostile to customer service. These are common issues in the administration of social safety net programs. Evidences in Thailand are not clear. If implementing organizations in Thailand already have these kinds of problems, the development of an organizational reform strategy will be just as important as the development of a program reform strategy. Some fundamental governance questions should be considered when designing any social protection scheme: What is the most appropriate social protection system to serve all citizens? What are the most suitable institutional arrangements for the administration of schemes? How to achieve operational efficiency?

(4) Designing methods should be strengthened. A recent World Bank study of safety net programs confirms that appropriate program choice, program design, and delivery are keys to reaching the poor successfully and efficiently. Several lessons can be drawn from overview of Thailand’s program experience. Many programs’ budget spending rate only reached around 60%. Due to the lack of information as to what kind of project should be started, some funds remain untouched. Some degree of targeting is required. But targeting can raise the costs of government administering the program, the transaction costs to recipients, and incentive costs to the economy. Targeting may also reduce political support for the program. Therefore, the extent and methods of targeting must be chosen with care.

When assessing the costs and benefits of transfer programs, and deciding on their design, it is important to consider all costs (administrative, transaction and so on) in choosing among alternative programs. Costs should be weighed against potential benefits.[10] Keeping the costs of participation low encourages the involvement of the poor. Well-designed programs can reduce transaction costs (travel distance, number of visits required, and the like) and enhance outcomes for the poor. Containing the costs of administering programs improves their sustainability. In general, self-targeted approaches work well in reducing overall costs and in gaining political support. However, success in self-targeting requires information about the poor— for example, about their consumption behavior and their reservation wages. This information is gained only through careful analysis of household data and careful monitoring of the effects of the program.

Targeting geographically can reduce costs when the poor are concentrated in particular regions. However, fiscal decentralization poses a challenge to the targeting of programs in resource-poor regions. Some evidence suggests that the poor in these regions may not gain from decentralization if revenue assignment does not match new expenditure responsibilities. More analytical work is needed to address this issue. Fiscal decentralization schemes need to be implemented carefully to ensure that funding for poverty-focused programs is not crowded out.

Conclusions

After spending several months of research in Thailand, I found that the effectiveness of these programs in reducing the impact of the crisis is very impressive. However, it is obvious that a lot needs to be done in future policies for sound and reasonable social safety nets in Thailand. The current government has shown its serious intention to continue to learn from the past experiences and adopt more appropriate policy measures.

The Thai government has worked closely with international organizations such as the World Bank and the Asian Development Bank during the past few years after the financial crisis, and has formulated some innovative safety net programs to fight the nightmare impact. Assistance to crisis-affected parents to keep their children in school, paid-training activities for retrenched and unemployed workers in the countryside, public loans to individuals who lost their regular jobs to set up their own self-employed businesses and 30 balt health care program, though with some defects, are examples of these programs.

The build up of any social safety nets depends upon the capacity of the country. As a developing country, some social safety net programs in Thailand are not sustainable and just as ad hoc ones are understandable. It is irrational to expect Thailand to establish the social safety nets as in Europe and North America at present time.

The crisis in Thailand offers an opportunity to re-evaluate certain aspects of development strategies and domestic policies. To encourage and guide people to have healthy consumption and saving manners may be a good way for the government to lead the people weather through plights. It is hoped that with strong intentions of building sound social safety nets and the willingness to learn from past experience and past mistakes, the prospects of effective social safety nets in Thailand are fairly optimistic.

References

Asian Development Bank, Interim, Country Operational Strategy Study, Thailand, May 1999

Jessica Vivian: Social Safety Nets and Adjustment in Developing Countries, UNRISD, July 1994

Subbarao,Kalanidhi; Rudra, K. Protecting the Disadvantaged in a High Growth Economy: Effectiveness of Poverty Targeted Programs in Thailand. Poverty and Social Policy Department. Washington, D.C.: World Bank, 1996.

Medhi Krongkaew: Thailand’s Social Assistance to the Poor, Manila Social Forum, December 8, 1999

Jayasankar Shivakumar: Thailand's Response to the Economic Crisis, Country Director for Thailand East Asia and Pacific Region. The World Bank Bangkok, August 18, 1998

Katherine Marshall: Social Issues Arising from the East Asia Economic Crisis, the World Bank, East Asia and Pacific Region, February 1999

C. Robb, Social Impacts of the East Asian Crisis: Perceptions from Poor Communities, East Asian Crisis Workshop - IDS University of Sussex UK, June 1998

Thailand Social Monitor: Challenge for Social Reform, World Bank Thailand Office, January 1999

Thailand Economic Monitor, World Bank Thailand Office, Bangkok, 2000-2001

J. Shivakumar, Thailand Social Monitor, Challenge for Social Reform, World Bank, 1999

Sunantha Natenuj, Poverty and Inequality during Crisis Period in Thailand, World Bank, 2000

Ms. Amara Pongsapitch, THE SOCIAL INVESTMENT FUND MONITORING FRAMEWORK Chulalongkorn University Thailand, 2001

Mr. Siwa Sirisoawaluk, PLANNING AND IMPLEMENTING PUBLIC WORKS IN THAILAND Director of the Bureau of Policy and Planning, Ministry of Interior, Thailand, 2001

The Impact of the Asian Financial Crisis on the Health Sector in Thailand, ADB, 2001

Somkiat Tangkitvanich, Human Resource Development: Where to Invest for the Future? TDRI Quarterly Review Vol. 14 No. 3 September 1999, pp. 11-17

Winnie C. Yip, Impact of Capitation Payment: The Social Security Scheme of Thailand, Centre for Health Economics, Chulalongkorn University, January 2001

Bangkok Post from 1997 to 2001

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[1] Siwa Sirisoawaluk, Planning and Implementing Public works in Thailand, 1999.

[2]“ Special Fund to Cover Kidney Problems”, Penchan Charoensuthiphan, Bangkok Post, April 12, 1999.

[3]Business news brief, Bangkok Post, November 1, 2001

[4] Workplaces stand to gain from coverage expansion, Bangkok Post, September 16, 1999

[5] Wichit Sirithaveeporn: B16bn boost for property, jobs Details of `New Year' gift to be revealed next month, Bangkok Post, November 8, 2001

[6] Anjira Assavanonda: 30-Baht Health Care Scheme Goes Nationwide, Bangkok Post Oct. 2, 2001

[7] Yuwadee Tunyasiri: Scheme needs B23bn more, Cost keeps rising by at least 2% a year, Bangkok Post, March 18, 2001

[8] Post Reporters: Top-up fund for overburdened hospitals Lack of reliable data makes planning hard , Bangkok Post, March 19, 2001

[9] Vasana Chinvarakorn Penchan Charoensuthipan: Survey: Poor hit hard by crisis Income drops 25% as cost of living up 40%, Bangkok Post, March 22, 1999

[10] Poverty Reduction and the World Bank: Progress in Fiscal 1996 and 1997, World Bank

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