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Multi-dimensional Review of Thailand (Volume 2)

In-depth Analysis and Recommendations

image of Multi-dimensional Review of Thailand (Volume 2)

Thailand is a fast emerging country that aspires to become a high-income economy by 2037. Still, Thailand’s growth path has created large disparities that risk obstructing the next stage of development. This report lays out three transitions that Thailand needs to master to build capabilities and sustain faster but also more inclusive economic growth. First, the country should move from a growth path dominated by few and geographically concentrated sources of innovation to one that focuses on unlocking the full potential of all regions. Second, to support a new growth agenda, it should organise multi-level governance and the relationship between the many layers of government more effectively, particularly with regards to financial resources. Last but not least, Thailand should focus on water and environment, moving from a resource-intensive growth path with costly natural disasters to one characterised by sustainable development. In the case of water, this means moving from ad-hoc responses to effective management of water security.

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Making multi-level governance work for more effective development

OECD Development Centre

Despite several attempts at decentralisation reform since the 1990s, Thailand’s governance system remains highly centralised. Strong central government control over subnational governments has not led to uniform service levels or harmonised revenue bases. On the contrary, there are marked fiscal disparities between Thailand’s subnational governments. Thailand’s dual multi-level governance and high number of subnational governments (LAOs) results in a governance system that is complex and fragmented. There are several alternatives available for Thailand to tackle the current problems. A clear nationwide plan should be developed to prepare for reforming the subnational government structure, financing system, and spending and revenue assignments. LAOs should be empowered by enhancing their spending and revenue autonomy. Reorganising the current spending assignments between government levels should be another priority. Merger reforms or enhanced co-operation should be considered to build adequate capacity among subnational governments. A stronger own revenue base would contribute to self-rule and accountability among Thailand’s subnational governments. To that end, LAOs should rely on at least one important tax base: for instance, a local surtax on the personal income tax collected by the central government would be an option. In addition, Thailand should reform other sources of local financing, such as the property tax and the transfer system.

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