ASIAN DEVELOPMENT BANK Operations Evaluation Department

PROJECT PERFORMANCE AUDIT REPORT

FOR

THAILAND

In this electronic file, the report is followed by the Management response.

Program Performance Audit Report

PPA: THA 31606 (Final)

Social Sector Program (Loan 1611-THA) in Thailand

April 2005

Operations Evaluation Department

valuation Study

CURRENCY EQUIVALENTS Currency Unit baht (B) At Appraisal 11 February 1998 = $0.0222 = B44.95 At Program Completion 31 October 2002 $0.02275 B43.95 ABBREVIATIONS ADB BOB CALOW COS DMC EA ICL IMF MMR MOE MOF MOPH MOL MOLSW NEA NESDB NGO OEM ONESQA PCMC PCR PPAR SDF SPL SSP TA UNESCO Asian Development Bank Bureau of the Budget Center for Assistance to Laid-Off Workers country operational strategy developing member country executing agency Income Contingent Loan International Monetary Fund maternal mortality rate Ministry of Education Ministry of Finance Ministry of Public Health Ministry of Labor Ministry of Labor and Social Welfare National Education Act National Economic and Social Development Board nongovernment organization Operations Evaluation Mission Office for National Education Standards and Quality Assessment Program Coordinating and Monitoring Committee program completion report program performance audit report Skills Development Fund special program loan Social Sector Program technical assistance United Nations Educational, Scientific and Cultural Organization NOTES (i) The fiscal year (FY) of the Government ends on 30 September. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY1998 ends on 30 September 1998. In this report, "$" refers to US dollars. : : Bruce Murray Susan D. Tamondong At Operations Evaluation 1 September 2004 $0.02403 B41.61

B1.00 $1.00

(ii)

Director General, Operations Evaluation Department Evaluation Team Leader

Operations Evaluation Department, PE-661

CONTENTS BASIC DATA EXECUTIVE SUMMARY MAP I. BACKGROUND A. Rationale B. Formulation C. Objectives and Scope of the Program and Technical Assistance D. Cost, Financing, and Executing Arrangements E. Implementation F. Completion and Self-Evaluation G. Operations Evaluation PLANNING AND IMPLEMENTATION PERFORMANCE A. Formulation and Design B. Achievement of Outputs C. Cost and Scheduling of the Program D. Organization and Management ACHIEVEMENT OF PROGRAM PURPOSE A. Operational Performance B. Performance of the Operating Entity C. Performance of Technical Assistance PROGRAM OUTCOMES A. Achievement of Development Impacts B. Policy Reform Measures C. Socioeconomic Impact D. Environmental Impact OVERALL ASSESSMENT A. Relevance B. Efficacy C. Efficiency D. Sustainability E. Institutional Development and Other Impacts F. Overall Program Rating G. Assessment of ADB and Borrower Performance ISSUES, LESSONS, AND FOLLOW-UP ACTIONS A. Key Issues for the Future B. Lessons Identified C. Recommendations and Follow-Up Actions Page iii v xi 1 1 2 3 4 4 5 5 6 6 8 8 8 9 9 14 14 15 15 18 19 19 20 20 20 20 20 20 21 21 22 22 23 24

II.

III.

IV.

V.

VI.

S. D. Tamondong, evaluation specialist (team leader), was responsible for the preparation of this report. A. Anabo, senior evaluation officer, and Iris de Guzman, senior evaluation assistant, supported the study in Manila. A local study team in Bangkok, Asia Policy Research, with David Oldfield, and part-time consultant, Amara Pongsapich, participated in the Operations Evaluation Mission. The guidelines formally adopted by the Operations Evaluation Department (OED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of the management of OED, there were no conflicts of interest of the persons preparing, reviewing, or approving this report.

ii

Page APPENDIXES 1. Social Sector Program Framework 2. Summary of Social Sector Program Activities and Actual Project Costs 3. Status of Compliance with Policy Conditions 4. Status of Compliance with Loan Covenants 5. Performance of Related Technical Assistance 6. Program Implementation Structure 7. Tables and Figures 8. Vocational Education in Thailand Since the Crisis 9. University Autonomy: King Mongkuts University of Technology (Thonburi) 10. Ban Phraeo Hospitals Autonomy Experience 11. Estimated Cost of Reforms Under Social Sector Program 12. Socioeconomic Indicators SUPPLEMENTARY APPENDIXES (available on request) 1. Social Sector Program Impacts on Vulnerable Groups 2. Education Indicators 3. Labor and Social Welfare Program 4. Health Indicators 25 26 30 36 39 43 44 48 50 52 54 55

Attachment:

Management Response on the Social Sector Program in Thailand (Loan 1611-THA)

BASIC DATA Social Sector Program (Loan 1611-THA) Program Preparation and Institution Building TA No. TA Project Name Type Person-Months 2920 Social Impact Analysis of ADTA 3 the Economic Crisis 2995 Capacity Building for ADTA 47 Social Sector Reform 2996 Education Management ADTA 45 and Financing Study 2997 Health Management and ADTA 46 Financing Study Key Program Data ($ million) Total Program Cost ADB Loan Amount/Utilization ADB Loan Amount/Cancellation Key Dates Management Review Meeting Appraisal Loan Negotiations Board Approval Loan Agreement Loan Effectiveness First Tranche Release Second Tranche Release Loan Closing Program Completion Months (effectiveness to completion) Borrower Executing Agency Mission Data Type of Mission Reconnaissance1 Appraisal Inception Program Administration Consultation Review Program Completion Operations Evaluation2 As per ADB Loan Documents 500.00 500.00 Expected Amount $50,000 $700,000 $700,000 $700,000 Approval Date 26 Nov 1997 12 Mar 1998 12 Mar 1998 12 Mar 1998

Actual 500.00 500.00 0.00 Actual 7 Nov 1997 1216 Jan 1998 45 Feb 1998 12 Mar 1998 13 Mar 1998 17 Mar 1998 17 Mar 1998 28 Oct 1999 31 Mar 2000 Sep 2001 42

11 Jun 1998 11 Jun 1998 Jun 1999 31 Mar 2000 Sep 2001 40 Government of Thailand Ministry of Finance No. of Missions 1 1 1 1 4 1 1

Person-Days 143 30 25 2 76 15 84

ADB = Asian Development Bank, ADTA = advisory technical assistance, TA = technical assistance. 1 On 10 October 1997, ADB management approved the upgrading of the Reconnaissance Mission (1130 September 1997) to a Fact-Finding Mission. 2 The Operations Evaluation Mission comprised S. D. Tamondong (evaluation specialist and mission leader), a reform specialist (staff consultant), a part-time social sector adviser (consultant), and a local research assistant.

EXECUTIVE SUMMARY The $500 million Social Sector Program (SSP), which the Asian Development Bank (ADB) approved in March 1998, was part of the International Monetary Fund (IMF)-led rescue package that aimed to help Thailand manage the impact of the 1997 financial crisis. The Ministry of Finance (MOF) was the Executing Agency, with the National Economic and Social Development Board (NESDB) serving as technical secretariat for implementation, monitoring, and coordination. The Ministry of Labor and Social Welfare (MOLSW), Ministry of Education (MOE), and Ministry of Public Health (MOPH) were the main implementing agencies. SSPs three main objectives were to (i) help mitigate the short-term adverse impacts of the crisis on Thai society, particularly on the most vulnerable groups; (ii) initiate structural reforms to enhance the competitiveness of the Thai economy through the development of human resources; and (iii) reduce inefficiencies in the provision of social services. The first objective was met, while the other two were only partly achieved. The loan was released in two tranches: $300 million upon loan effectiveness, and $200 million on 28 October 1999 upon the Governments fulfillment of the requirements for institutional and policy actions for program implementation. ADB provided three technical assistance (TA) grants of $700,000 each to support the policy reforms needed to improve efficiency in the labor, education, and health sectors. The loan, which was disbursed fully, closed on 31 March 2000. The Program was completed in September 2001, and the loan was prepaid on 30 September 2002. SSPs policy matrix contained 30 conditions, broadly categorized into the labor, education, and health sectors. The policies and reforms required were consistent with Thailands Eighth National Economic and Social Development Plan and its 1997 Constitution. While the first tranche was released on the day of loan effectiveness, the second tranche was delayed by 4 months until the Government took the necessary policy actions. Five broad policy priorities supported by the SSP in the education sector aimed to (i) reduce the incidence of school dropouts, (ii) improve the quality of priority education programs, (iii) rationalize MOEs staff size, (iv) decentralize to make all levels of education more responsive to societal and community needs, and (v) promote the private sectors provision of education. However, the achievements were less than expected. Progress in achieving the policy objectives in the education sector was disappointing. Despite efforts to reduce dropouts, the transition rate to upper secondary school has fluctuated and remains below the precrisis level; and the completion rates have not improved demonstrably. The national average test scores for the past 5 years are below the expected levels, and the quality inspection body has not met its assessment targets. Staff have not been rationalized and reallocated to rural areas to a significant degree. Decentralization has not materialized, despite several policy actions designed to facilitate it. However, progress was made in developing the enabling framework for private education. The Government amended the B20-billion Human Resources Development Fund to make it more accessible to private schools that wished to draw on the funds and build new structures. A policy to prevent overcrowding at all levels of education in private schools also was adopted. Reforms have allowed private schools to establish their own fee structure, avail of tax incentives, and adopt a registration and accreditation system similar to that of public schools. In May 1999, the cabinet approved the Ministry of University Affairs autonomy master plan, which was designed to make all universities autonomous by 2002. However, this plan was abandoned due to strong resistance from the faculty and staff of the universities, lack of understanding about the plan, and concerns about job security. Universities were to be made

vi autonomous, granted control over their non-salary current budget, and establish a performancebased monitoring system. At the Operations Evaluation Mission (OEM), only King Mongkuts University of Technology had gained autonomy. Four of 11 other universities that submitted autonomy plans are awaiting parliamentary approval. The remaining 10 public universities have not submitted autonomy plans. SSPs main contribution in the education sector was to accelerate the introduction of reforms that were under Government consideration before the financial crisis. However, the change in Thailands political leadership and the resulting changes in the Governments priorities in the education sector undermined the continuity and the sustained, efficient implementation of policies that the Program was designed to support. Many of the action plans in SSP were revised or canceled after the change of Government in 2001, which was followed by a series of new appointments to senior positions in MOE. In the health sector, policy priorities supported by the SSP included (i) protecting the poor; (ii) shifting the budget focus towards programs for women, children, and HIV/AIDS; (iii) improving health care service delivery in rural areas; and (iv) enhancing efficiency in health care delivery by restructuring hospitals into corporations. Achievements in these areas were less than anticipated. To protect the poor, the budget and coverage of two health care schemesthe Public Assistance Scheme and the Voluntary Health Cardwere expanded under SSP. However, the two programs were replaced by the new Governments B30 health policy, which allows all Thai citizens, to avail of medical services, including operation, for only B30 maximum payment per hospital visit. The increase in the immunization budget did not improve coverage rates for women and children consistently, while the budget for HIV/AIDS prevention program was cut. In May 1999, the cabinet approved the action plan for redeploying more health personnel to rural areas. However, the plan was not implemented. Finally, SSPs requirement to restructure hospitals into corporations to increase the efficiency of health care delivery was not implemented. At the OEM, only one (the Ban Phraeo Hospital) of 919 public hospitals in Thailand had become autonomous since October 2000. For labor and social welfare, SSP policy actions included (i) support to laid-off workers; (ii) employment of vulnerable groups; (iii) pro-poor resource allocation; (iv) incentives to the private sector; and (v) improved competitiveness of the labor force. The achievements were less than expected. To address laid-off workers and employment of vulnerable groups, the Government established Centers for Assistance to Laid-Off Workers (CALOWs). However, when the direct impact of the Asian financial crisis eased in 2001, CALOWs were abolished. They were absorbed by career and employment centers in provincial capitals, serving all unemployed people regardless of income. SSP provided assistance to vulnerable groups and laid-off workers in a timely manner. Social security coverage was extended by 12 months, double the 6-month extension required by the SSP. However, the OEM could not locate any records on how many people received full-time or temporary employment under the Program. The Government reported that many of the urban unemployed returned to the provinces and were supported by their families. While the proportion of ministerial budgets for poorer provinces has increased due to pro-poor targeting, disparities between urban and rural areas have not improved significantly. However, incentives for the private sector did improve. Private companies were offered tax deductions for sending their workers for training sponsored by the Ministry of Labor. The rationalization of minimum wage did not affect labor competitiveness, as employers and employees agreed to a flexible arrangement (i.e., reduced working hours or social benefits to prevent layoffs).

vii The Labor Policy Action Plan that was prepared was expected to enhance the efficiency of labor markets, and improve labor relations and competitiveness. However, the plan was not implemented as MOLSW was dissolved in 2001. To address the issue of competitiveness, the new Government launched a new action plan in March 2003 to make Thailands labor force more competitive in a knowledge-based economy. Twelve industries were identified that would require certain skills in the next decade. Partnerships with schools were established to teach the required skills in their curriculum. This positive development was not related to SSP. Three TAs, totaling $2.1 million, were designed to support policy reforms in SSP. The OEM rated the TAs for capacity building for social sector reform and education management as successful. The third TA for health management was rated as unsuccessful. The outputs of the three TAs were technically sound, and influenced the restructuring of the Government and reformulating new policies in the social sectors. However, the TA reports were not widely disseminated, confined mainly to a few senior government officials. The capacity building TA embodied effective management and implementation processes, which NESDB used in formulating the Ninth National Plan. The TA on education management influenced the drafting of legal instruments for decentralizing education. However, its impact was confined to the Implementing Agency, the Office of the National Education Commission. The direct application of the recommendations from the health management TA failed to achieve tangible results. Overall, SSP was rated partly successful. Its implicit objective to provide budget support during the financial crisis was met. It was important for ADB, the premier development institution in the region, to act in coordination with the international donor community, particularly IMF and the World Bank, and provide urgently needed financial support during the Asian financial crisis. However, few policy objectives were achieved, and many were not robust enough to withstand a change in Government. Although the short-term adverse impacts of the financial crisis were partially mitigated, SSP did not have a significant impact on the longer-term policy framework to guide the development of the social sectors. Specific action plans required by SSP were submitted on time, but were not implemented after the release of the second tranche of the loan. The program completion report did not assess the likely impact of the new Government on the sustainability of reforms supported by the Program. While the design of SSP was relevant and timely, it lacked specific indicators to define and monitor expected outcomes. For example, SSP lacked indicators for the expected quantitative and qualitative improvements in math, science, and language. Although budgetary indicators were included, increased budgets did not improve student performance qualitatively. In the health sector, the key performance indicator was the ratio of health staff per population. While this is an important input indicator, it does not measure the desired outcome (i.e., better quality health services for people). No clear monitoring framework was built in the SSP. ADB funded a consultant in NESDB to monitor SSP implementation for 1 year. However, no institutional follow-up occurred after the consulting contract was over. In labor, employment service centers, which provide assistance to all people regardless of gender and economic status, absorbed CALOWs. Monitoring records could not be located to determine the extent of assistance provided to laid-off workers and vulnerable groups targeted by SSP. As the policies that SSP required were already part of the government agenda before the loan, agreement on the conditions was immediate. The OEM found that the 11 projects funded by the first tranche of the loan were not designed specifically for SSP. Rather, they were existing proposals that had not been implemented by the line ministries due to budget cuts. When MOF and NESDB asked for project proposals, these proposals were revitalized. Implementation of the action plans stopped when a new Government took office in 2001. With

viii the appointment of new leadership in various ministries, many of the SSP projects and activities faded out. The initiatives proposed by the new administration took priority, leading to the replacement or early termination of projects under SSP. New social sector strategies and programs were introduced. This experience highlights the difficulty of designing strategic policy initiatives that are robust enough to withstand a change in government. However, the key principles of reform in labor and social welfare are likely to be sustained, despite the changes in the original plans. The new Government is committed to sustaining the levels of funding for key social sector programs. In education, for example, decentralization is supported, although most of the draft laws submitted to Parliament in 2001 were revised. The new education policy exceeded SSPs policy targets for the reduction of MOE staff, and created a new student loan scheme for higher education. In health, the new B30 policy, which replaced SSPs Voluntary Health Card scheme, exceeded the target coverage. The new Government placed priority in improving efficiency and effectiveness in the labor market and in the health and education sectors. While the strategic objectives were broadly consistent with the strategic thrust of the SSP, the new Government used policies and programs to achieve these strategic objectives that were different from those envisioned when the SSP was formulated. The socioeconomic impact of SSP was generally positive, with financial resources helping to mitigate rural poverty after 1999. At the peak of the financial crisis in 1999, more than 20% of the rural population was classified as poor, compared with about 15% before the crisis. The poverty incidence dropped to 15% in 2001 and to 13% in 2002. This statistical pattern could suggest that the Governments efforts to reduce poverty after the crisis were successful. The newly re-elected Government recently announced that it would spend up to B1.5 trillion ($39 billion) on national development and pledged to eradicate poverty in 6 years by focusing on raising overall living standards in deprived rural regions. The institutional development impact of SSP was moderate. Although many of the policies were not carried out, the implementing agencies acknowledged that the Program expedited the reform process. For example, MOF appreciated the lessons learned in managing the first social sector program loan in the country. MOPH acknowledged the experience gained under the per capita financing of the health sector, which influenced the formulation of the B30 policy. NESDB credited the Program for teaching skills related to poverty targeting. One of the important lessons learned from SSP concerns the manner of ADBs response to the challenges and tensions of a crisis, such as the Asian financial crisis. Liquidity support was needed, and ADB acted expeditiously to support the IMF-led rescue package. Standard program loans require a long-term reform agenda with carefully thought out and sequenced reforms that are fully owned by the Government. SSP accelerated the reform process that the Government had planned before the crisis. Formulating social sector policy reforms requires a good knowledge of the legislative system and political economy, as well as deep sector expertise that can be drawn upon during preparation. Adequate sector analysis, extensive needs assessment, broad consultation, and a well-defined monitoring and evaluation system are requirements for successful program loans. Clear links between national and local institutions have to be made, including well-defined functional and financial responsibilities. The design of the program loan must incorporate specific targets and clear measures of achievement during and after implementation. A systematic monitoring and evaluation system over an agreed period also must be included. Properly formulating a complex program loan takes time, effort, expertise, and intense discussions with the Government and other stakeholders. Due to the urgently needed budget support and the balance of payments crises of international dimensions, program preparation was cut short for the SSP. In OEMs opinion, this

ix was appropriate, given the circumstances prevailing at the time. Processing larger TAs that could have deepened ADBs sector knowledge and enhanced the ongoing policy dialogue would have taken too much time. As an institution, ADB has learned that standard program loans are not necessarily the best lending modality to respond to situations such as the Asian financial crisis. Stabilizing currency and capital markets, and the financial sector, as well as mitigating social impacts during a financial crisis require immediate support. Long-term structural reforms need to be addressed in separate, subsequent interventions. In October 2003, ADB adopted the special program loan (SPL) lending modality to assist ordinary capital resources-eligible developing member countries (DMCs) or graduated DMCs that are affected by extraordinary and unexpected crises, principally as a feature of globalized capital markets. Large SPLs can be provided as part of an international rescue effort in cooperation with development partners, including IMF and the World Bank. For such operations, ADB would not impose additional policy conditionalities related to particular sectors. Had SPLs been available at the time, an SPL would have been a more appropriate lending modality to support Thailand during the Asian financial crisis.

Bruce Murray Director General Operations Evaluation Department

I.

BACKGROUND

A.

Rationale

1. After 10 years of rapid economic growth1 that epitomized the Asian economic miracle, Thailands growth abruptly halted in mid-1997 with the onset of the Asian financial crisis. The unanticipated Asian crisis had a major impact on global capital flows. Before the crisis, Thailand was viewed as a model of sound economic management. The Government had adopted prudent fiscal policies and outward looking economic policies. However, the Asian financial crisis caused a liquidity crisis in Thailand. In the severe recession that followed, gross domestic product contracted by 1% in 1997 and 9.4% in 1998. The value of the baht weakened dramatically against the dollar, investment declined precipitously, the stock market collapsed, many financial institutions became insolvent, businesses could not repay their loans, and the fiscal deficit increased. 2. Many people, particularly the poor, suffered because of the Asian financial crisis. The adverse social consequences included an increase in poverty. Layoffs pushed unemployment higher. Fiscal pressures resulted in rising costs of medical care, cuts in government expenditures on social services, medical services, and poverty programs, and higher dropout rates in the education system. Between 1990 and 1996, the incidence of poverty fell from 27.2% of the population to 11.4%,2 with more than 1 million people lifted out of poverty each year. The absolute number of poor during this period dropped from 15.3 million in 1990 to less than 7 million in 1996, thus meeting the Millennium Development Goal for poverty reduction. With the onset of the Asian financial crisis in 1997, more than 2 million people fell back into poverty. The poverty incidence increased from 11.4% of the population in 1996 (6.8 million people) to 14.2% in 2000 (almost 9 million people). 3. Responding to the immediate imperative to address the financial crisis and mitigate the adverse social costs, the Asian Development Bank (ADB) pledged $1.2 billion3 to assist Thailand in 19971999. The pledge was part of the $17.2 billion International Monetary Fund (IMF)-led external assistance package for Thailand. The World Bank and the Government of Japan also played major roles in supporting assistance packages. The Government, business community, funding institutions, and press focused on the immediate problems brought about by the crisis, and the need to restore macroeconomic stability. However, systematic inefficiencies and policy changes also had to be addressed to improve the provision of social services under a policy of fiscal austerity.

During the 1990s, Thailands economy grew at 89% annually, inflation was less than 6%, and exports grew at an average annual rate of 15%. (ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grants to the Kingdom of Thailand for the Social Sector Program. Manila. p. 2.) Office of the National Economic and Social Development Board and United Nations Country Team in Thailand. 2004. Thailand Millennium Development Goals Report 2004. Bangkok. Of this total, $800 million was to be provided through two program loans: one for the financial sector and the other for the social sector. Loan 1600-THA (ADB. 1997. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Thailand for the Financial Markets Reform Program. Manila), for $300 million, was approved on December 1997 and disbursed immediately. Loan 1611-THA (ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Thailand for the Social Sector Program. Manila) for $500 million was the second loan.

2 B. Formulation

4. The Social Sector Program (SSP) was designed and formulated expeditiously to help the Government of Thailand mitigate the immediate negative social impacts of the financial crisis on the poor and vulnerable groups and to lay the basis for strengthening the social sectors in the longer run. The Program was based on small-scale technical assistance (TA),4 which provided a framework for the Government to review and adjust the implementation of its social sector activities during the remaining period of Thailands Eighth National Economic and Social Development Plan (19972001).5 The targets, scope, and the implementation of this plan needed to be reassessed and preparation work begun for the Ninth Plan. 5. After a meeting of funding agencies in Tokyo in August 1997, ADB sent a follow-up mission to Bangkok to discuss the scope and role of its assistance in the financial and social sectors. Agreement with the Government was reached with the SSP loan proposal during the visit of ADB mission. The Fact-Finding Mission was fielded in September 1997, followed by the Pre-Appraisal Mission in October 1997, and the Appraisal Mission in January 1998. During the preparation of the SSP loan, ADB consulted with the Government, other funding and development agencies, nongovernment organizations (NGOs), and people affected by the crisis. Sector studies6 by ADB, as well as by other agencies,7 provided the background for program preparation.8 These studies were not exhaustive but during this unexpected crises of global proportions there was no time to do more to formulate a carefully thought out reform agenda that was supported by more up to date analytical studies and carefully discussed with the Government and other stakeholders over an extended period of time. ADB, the international funding community, and governments from the Association of South East Asian Nations were under intense pressure to take immediate action to stabilize currency and capital markets to contain the Asian contagion. 6. ADB had some knowledge on the social sectors from previous operations in Asia, though this was the first in Thailand. A $500 million proposal was developed to help the Government respond to the financial crisis and carry out policy reforms in SSP. Initially, ADB proposed $300 million for the loan. However, the Ministry of Finance (MOF) requested an additional $200 million as budget support. More than B300 billion9 of state funds were needed to
4

TA 2920-THA (ADB. 1997. Technical Assistance to the Kingdom of Thailand for the Social Impact Analysis of the Economic Crisis. Manila), for $50,000, was approved in November 1997, with government financing of local currency cost equivalent to $10,000, to provide an overview and highlight key issues facing the social sectors (labor, education, and health) and recommend policy directions for the Government. ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grants to the Kingdom of Thailand for the Social Sector Program. Manila. These studies include TA 2082-THA (ADB. 1994. Technical Assistance to the Kingdom of Thailand for the Skills Development Project. Manila), for $484,000, approved in April 1994; TA 2104-THA (ADB. 1994. Technical Assistance to the Kingdom of Thailand for the Higher Education Development Project. Manila), for $400,000, approved in June 1994; TA 2537 (ADB. 1996. Technical Assistance to the Kingdom of Thailand for the Nonformal Secondary Education Project. Manila), for $400,000, approved in February 1996; TA 2523-THA (ADB. 1996. Technical Assistance to the Kingdom of Thailand for the Coordination and Private Sector Participation in Skills Development Project. Manila), for $467,000, approved in January 1996. The World Bank, United Nations Development Programme, Canadian International Development Agency, Danish International Development Assistance, International Labour Organization, German Agency for Technical Cooperation, and Overseas Economic Cooperation Fund provided grants to Thailand for relevant studies in the social sectors from 1991. A listing of these studies can be found in ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Thailand for the Social Sector Program. Manila (Appendix 4, p. 2). The 1997 policy and the revised 2003 policy on program lending (Operations Manual Section [OM] D4/BP) require comprehensive sector analysis before program lending. Equivalent to about $9,463 million based on the 1997 exchange rate of $1=B31.70.

recapitalize domestic banks and finance companies. The SSP injection represented less than 3% of the 1998 financial reform program designed to manage the impact of the Asian financial crisis. As reflected in the conditionalities of the program loan, the Government committed to undertake policy reforms and mitigation measures in labor and social welfare, education, and health sectors. 7. The Report and Recommendation of the President (RRP) noted the importance of government ownership and strong political commitment to carry out the reforms. The Governments commitment to the Program and its reforms were manifested clearly in discussions with the cabinet and at the highest levels of the ministries. A deputy prime minister was appointed to chair the Program Coordinating and Monitoring Committee (PCMC), which was to oversee SSP. However, the RRP recognized the risk of complexity in coordinating a large number of government agencies and line ministries. 8. ADB approved the loan on 12 March 1998. Some Board members expressed reservations about its design due to the sense of urgency and implicit political factors (e.g., creating goodwill with the Government, and being the first multilateral funding agency to finance the social sectors in Thailand). In the view of the Operations Evaluation Mission (OEM), these reservations were well-founded. Program preparation was rushed to respond to the crisis. No time was available to undertake detailed sector analysis, or to discuss the Program with the Government over an extended period. ADB did not have deep sector knowledge in the health, education, and labor sectors based on previous operations in the country. SSP was the first social sector loan in Thailand. These factors raised questions about the depth and quality of the analysis on which the Program was based. That being said, it was important for ADB and other major funding partners to participate in IMF-led rescue packages to help Thailand and other crises affected countries. This required providing large scale, quick disbursing assistance in a short time period. Traditional program loans, prepared under great time pressure, were the only modality available to ADB. C. Objectives and Scope of the Program and Technical Assistance

9. The Programs three objectives were to (i) mitigate the short-term adverse impact of the crisis on society, particularly on the most vulnerable groups; (ii) initiate structural reforms to enhance the competitiveness of the Thai economy through the development of human resources; and (iii) reduce inefficiencies in the provision of social services. The OEM reconstructed an outline program framework (Appendix 1). The diagram does not show the implicit objective of the Program to support Thailand during the financial crisis, with an injection of capital to provide needed liquidity for financial institutions. MOF confirmed that $300 million of the SSP loan was used for this purpose. At that time, the private sectorThailands engine of job creationcould not access credit because of the collapse of the financial sector. The resulting retrenchment in businesses increased unemployment and poverty. 10. The Program was designed to strengthen the Governments budgetary capacity to cope with the social impact of the crisis in the short run, and to design and implement policy reforms and build the institutional capacity of the Government to undertake social sector reforms in the long term. The summary of activities carried out by SSP, and the corresponding project costs, are in Appendix 2. The specific outputs expected of the Program are categorized under (i) labor and social welfare, (ii) education, and (iii) health. For labor and social welfare, the outputs were to support laid-off workers, create employment for vulnerable groups, improve competitiveness of the labor market, promote private sector investment in training, and encourage pro-poor resource

4 allocation. Education outputs included prevention of school dropouts, improved quality of priority education programs, rationalized allocation of education staff, and promotion of the private sector in education. Health outputs included provision of health care for the poor, protection of priority health budgets, and decentralized health services provision. 11. The policy matrix contained 30 policy actions that the Government was required to undertake. Fourteen of these policy actions were to be met before the release of the first tranche of the loan ($300 million) in June 1998. An additional 16 policy actions were required for the release of the second tranche ($200 million) in June 1999. Of the 30 policy conditions, 9 were for labor and social welfare, 15 for education, and 6 for health. Appendix 3 contains the original policy matrix of conditionalities, with updates on the status after program completion. The loan covenants and compliance status are in Appendix 4. 12. Three TA grants, each for $700,000, financed from ADBs Japan Special Fund, were provided to support the policy reforms prescribed in SSP: (i) Capacity Building for Social Sector Reforms (TA 2995-THA); (ii) Education Management and Financing Study (TA 2996-THA); and (iii) Health Management and Financing Study (TA 2997-THA).10 These TAs are discussed in Appendix 5. D. Cost, Financing, and Executing Arrangements

13. The SSP loan for $500 million was from ADBs ordinary capital resources, with an amortization period of 15 years, including a 3-year grace period. The interest rate was determined in accordance with the pool-based variable lending rate system for US dollar loans and a standard program loan commitment charge of 0.75% per annum. The Bank of Thailand was to transfer the local currency proceeds or counterpart funds to the Government to support the social sector activities included under SSP. The loan was disbursed fully, closed on 31 March 2000, and pre-paid on 30 September 2002. E. Implementation

14. MOF was the Executing Agency of the Program. The National Economic and Social Development Board (NESDB) assisted MOF as the technical secretariat for implementation, monitoring, and coordination with line ministries. The Ministry of Labor and Social Welfare (MOLSW), Ministry of Education (MOE), and Ministry of Public Health (MOPH) were the main implementers of the related action plans and TAs. Other agencies, such as the National Education Commission and the Bureau of the Budget (BOB) were involved in the design and implementation of SSP. The United Nations Educational, Scientific and Cultural Organization (UNESCO) supported the implementation of the TA on education. 15. A steering committee, PCMC, was established to monitor the progress of SSPs implementation. The committee also was to provide guidance to, and coordination among, the implementing agencies. To signify the Governments strong commitment to SSP, a deputy prime minister was appointed as chairperson of PCMC. MOLSW established the Office for International Loans to monitor each project. This office, which reported to a deputy permanent secretary, submitted reports each month to MOF and NESDB until February 2001. However, not all relevant MOLSW offices or departments involved in SSP provided updates on their activities
10

These TAs are associated with ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grants to the Kingdom of Thailand for the Social Sector Program. Manila.

every month. Other ministries were less systematic in their monitoring and reporting. Overall, the Programs monitoring and reporting had weaknesses. MOF confirmed to the OEM that the submission of reports in English was a problem since Thais wrote reports in their language. Partly because of the language issue, and partly because of weaknesses in the monitoring system, the Government did not comply fully with the policy loan covenant on reporting (Article 1V, Section 4.05 (b) of the Loan Agreement). 16. Most of the other provisions in the loan covenant and policy conditionalities were complied with except for the reporting requirements (Appendixes 3 and 4). F. Completion and Self-Evaluation

17. The program completion report (PCR) of December 2002 rated SSP as highly successful. No major concerns were highlighted. The PCR identified lessons learned, particularly those relating to proper information dissemination during program preparation and implementation to enhance support and participation by the Government and civil society. The reasons cited for this rating were (i) program objectives remained relevant long after appraisal; (ii) mitigation efforts on the social impact of the financial crisis were achieved, although the impact of policy reforms in the long term was not assessed; (iii) changes were not required in the scope of the Program or in its implementation schedule; (iv) reforms proposed under the Program were mainstreamed in the policy process of the Government; and (v) significant capacity was built through the three TAs in monitoring the impact of the financial crisis, and in implementing the proposed reforms in the education and health sectors. Based on the findings of this report, the OEM believes that the PCRs rating was too high. 18. Following elections in 2001, a new Government assumed office, headed by a rival political party. The PCR did not anticipate the impact of the new Governments policies on SSPsupported policies and initiatives. At PCR preparation, the new political leadership was expected to implement draft legislation and cabinet-approved action plans of the previous Government. However, this did not materialize. The new Government adopted new policy initiatives, and none of the action plans were implemented after SSP was completed in 2001. Because of developments after the PCR, the OEM concluded that the PCR rating was no longer appropriate. The PCR, in the OEMs view, also overestimated the impact of the three TAs. The PCR did not examine the impact of SSP on the poor and vulnerable groups, and the sustainability of reforms. With the release of the second tranche, an implicit assumption was made that social sectors would benefit and that SSP policy reforms would be sustained. G. Operations Evaluation

19. An OEM visited Thailand between 5 August1 September 2004 to evaluate the program performance of SSP, as well as the operational impact of the three TAs. The OEM examined the Programs formulation, design, implementation, and sustainability by (i) reviewing available documentation and statistical data; (ii) conducting interviews with key informants; (iii) rapid appraisal techniques; (iv) triangulation;11 (v) meetings with Government and development partners; (vi) focused discussions with stakeholders; and (vii) on-site visits to schools, hospitals,
11

Triangulation is the use of three or more theories, sources, or types of information, or types of analysis, to verify and substantiate an assessment. By combining multiple data sources, methods, analyses, or theories, evaluation seeks to overcome the bias that comes from single informants, single methods, single observer, or single theory studies. (Source: Organisation for Economic Co-operation and Development. 2002. Glossary of Terms in Evaluation and Results Based Management, Development Assistance Committee. Paris.)

6 training centers, vocational schools, employment centers, and home-craft industries supported by NGOs. SSP projects in seven provinces12 and in Bangkok were visited during field work. The OEMs findings were discussed during an evaluation dissemination workshop, jointly organized by the OEM and MOF in Bangkok. All participating Government agencies under SSP, as well as representatives of other stakeholders (the United Nations Development Programme, UNESCO, World Health Organization, United Nations Childrens Fund, World Bank [International Bank for Reconstruction and Development], Japan Bank for International Cooperation [JBIC], and NGOs) attended the workshop. At a wrap-up meeting with MOF at the end of the Mission, the OEM reached an agreement on the rating of this program performance audit report (PPAR).

II. A.

PLANNING AND IMPLEMENTATION PERFORMANCE

Formulation and Design 1. Consistency with Government and Asian Development Bank Strategy

20. The program design, which targeted the poor and vulnerable groups affected by the financial crisis, was relevant and consistent with ADB and Government strategies. SSP was consistent with the Eighth National Economic and Social Development Plan (19972001), which aimed to shift from a growth orientation to people-centered development (footnote 5). The policy reforms contained in SSP also were consistent with Thailands 1997 Constitution, which calls for universal education, better health services, and an unprecedented devolution of fiscal powers to provincial governments.13 SSP also was designed to fit with ADBs changing strategy14 in Thailand. With the advent of the financial crisis, attention to social issues became critical. ADB provided simultaneous assistance to support financial and social sector reform programs in Thailand and Indonesia, two of the worst hit countries during the financial crisis. ADB also supported financial sector reform in Korea. The financial sector reform programs complemented the IMF led macroeconomic stabilization effort by providing much needed liquidity and by addressing structural and institutional deficiencies. The social sector programs were designed to ensure adequate budget provisions for basic social services for the poor, and to promote policy and institutional reforms. SSP was consistent with the broad efforts of the funding community, including ADB, to assist countries affected by the Asian financial crisis (e.g., Indonesia, Republic of Korea, and Thailand). 2. Time Frame for the Design

21. The Program was formulated quickly15 at a critical period during the 1997 financial crisis. It was part of an IMF-led rescue effort to prevent a collapse in Thailands financial sector, and to contain the Asian contagion. SSP was designed to use the crisis as an opportunity to push reforms needed in the social sectors. Given the severity of the crisis, the formulation and design of the SSP entailed a necessary trade-off between (i) a rigorous design review that would delay
12

Provincial and local offices visited were Chiang Rai, Chiang Mai, Mae Hong Son, Khon Khaen, Phuket, Hatyai, Samut Sakhon, and Samut Prakan (see map, page xi). 13 By the end of FY2006, 35% of all departmental budgets are planned to be shifted from the central to the provincial level. 14 ADBs strategic development objectives from 1995 included (i) promotion of economic growth; (ii) reduction of poverty; (iii) improvement in the status of women; (iv) human development, including population planning; and (v) environmental management. The Long Term Strategic Framework, starting in 2000, redefined the relationship of the poverty reduction objective with the others, giving more attention to social sectors. 15 SSP was formulated in just 3 months.

the provision of urgently needed liquidity; and (ii) speed in providing assistance to prevent further damage to Thailands balance of payments and financial sector, and to ameliorate the adverse impact on civil society, particularly the poor. Upon approving the loan, members of the Board of Directors expressed concerns about whether the Program was designed as well as it could have been. Their concerns included the benefit-cost of certain activities, such as the labor market programs; the focus on inputs rather than outcomes; and the apparent lack of details specified for processes such as decentralization. The SSP loan was approved expeditiously due to the urgent need for financial support during the financial crisis (para. 8). In the circumstances prevailing at the time, the OEM has concluded that a reasonable balance was achieved between speed of processing and depth of preparation. 3. Logic of the Design

22. The logic in the Programs design (i.e., the anticipated effects of the crisis on society) was coherent. The assumption that people losing jobs would be less able to afford their childrens education and health care made sense, as did the anticipated indirect effects on the elderly and other vulnerable groups. The Programs design comprehensively covered most of the critical aspects of labor, education, and health. It was balanced evenly among the three purposes of the SSP, with 35 sets of anticipated outputs corresponding to each purpose (Appendix 1). The inputs generally supported the attainment of program purposes. However, they lacked sequencing and an overall sense of integration. Several did not have specific targets or indicators for measuring progress or satisfactory achievement. 23. The design lacked some potentially critical elements that might have enhanced the Programs impact on specific subsectors. Some indicators in the original program framework did not correspond well to the actions that were supposed to be taken. For example, the only indicators for quantitative and qualitative improvements in math, science, and languages were budget allocations. Changes in budget allocations do not necessarily correspond to qualitative improvements. In health, the ratio of health staff per population, while an important indicator, is not adequate to improve the quality of services for the people. Instead of just enumerating the action plans, more attention should have been given to human resource management. 24. Nine of the conditions required only drafting action plans or cabinet approval of draft legislation, a critical issue in SSP design. The program design did not specify the details of implementation of the action plans or adoption of the legislation. For instance, one action plan called for the cabinet to approve a proposal to improve the labor forces competitiveness. However, this action plan eventually was abandoned. The scheme to reduce administrative staff in MOE by at least 25% through rationalization of positions and redeployment to local governments provided another example. Although the scheme was approved, the results were not achievedand no effort was made to do so. The commitment to make all public universities autonomous by 2002 also was not fulfilled. While the Government technically met the loan conditionalities and tranche release conditions in these cases, it was not under any obligation to implement the action plans or enact the legislation. Much of the SSP design focused on inputs and outputs (e.g., production of action plans), but not on the actions necessary to achieve the objectives, purpose, and impact of SSP. Managing for development results requires a greater focus on the achievement of objectives and purposes, so that the anticipated impacts materialize. 25. The 11 projects funded by the first tranche of the loan were not developed specifically for the SSP. Through interviews, the OEM learned that the projects were existing proposals that

8 had not been implemented earlier by the line ministries due to budget cuts. The proposals were revitalized when MOF and NESDB asked for submissions for SSP funding. B. Achievement of Outputs

26. The $500 million SSP loan was used to support financial institutions ($300 million) and the social sectors ($200 million). The PCR measured the program efficiency by counting specific outputs.16 These included the number of (i) laid-off workers who benefited from social security coverage during SSP, (ii) people employed by the two major expenditure programs under the Miyazawa Plan funded by the World Bank and JBIC, (iii) student loan recipients, and (iv) recipients of the health card scheme. However, such quantification was impossible during the OEM due to the lack of records after the PCR, discontinuation of many SSP projects after 2001, and absence of systematic data related to SSP. C. Cost and Scheduling of the Program

27. The Program did not link the loan proceeds to specific expenditures, giving the Government the flexibility to use them in accordance with the fiscal framework defined in its overall restructuring agreement with IMF.17 ADBs 1997 policy on program loans governing SSP allows the Government to use the loan on an unrestricted basis for general development purposes, or on a case-to-case basis for the development needs of the specific sector that is the focus of the program loan. The SSP loan was released in two tranches: $300 million upon loan effectiveness, and $200 million on 28 October 1999 upon the Governments fulfillment of the second tranche requirements necessary for program implementation.18 Cabinet discussions and approval of the extensive actions required by SSP delayed the release of the second tranche by 4 months. This delay did not cause significant problems with implementation, as activities were already underway in managing the crisis. D. Organization and Management

28. The organization and management of SSP is shown in the program implementation structure in Appendix 6. The functions of the PCMC, headed by the deputy prime minister, diminished after the release of the second tranche and as the impact of the Asian financial crisis was brought under control. Given the complexity of SSP conditionalities, and the lack of awareness from line agencies, the delivery of social services became less efficient (paras. 15 and 16).

16

ADB. 2002. Program Completion Report on the Social Sector Program (Loan 1611-THA) in Thailand. Manila (p. 10). 17 Refer to 1997 OM Section 6/BP, applicable at that time, particularly para. 18 on use of counterpart funds. 18 The requirements for the release of the first and second tranches are in the policy matrix in Appendix 3.

III. A.

ACHIEVEMENT OF PROGRAM PURPOSE

Operational Performance 1. Labor and Social Welfare

29. Labor and social welfare reforms under SSP included (i) the establishment of Centers for Assistance to Laid-Off Workers (CALOWs) to provide one-stop service for training referral, counseling, and job-placement assistance; (ii) the extension of social security coverage for workers laid off during the crisis by at least 6 months after retrenchment; and (iii) cabinet approval of programs to provide employment to vulnerable workers and the unemployed. CALOWs ceased operations in 2001,19 3 years before the OEM. Existing career guidance and employment centers in each province continue to provide similar services to all Thais, not only to the poor and vulnerable groups. The decision to integrate CALOWs services with the employment centers as normal services after the crisis was reasonable. To create job opportunities for laid-off workers, and to enhance their competitiveness, SSP supported a training program to develop computer skills of the unemployed with secondary education, and to train them in information technology. The Ministry of Labor (MOL)20 also absorbed this program. 30. By extending social security coverage for laid-off workers from 6 to 12 months, the Government exceeded the conditions in SSPs policy matrix. This was a desirable, pro-poor, temporary measure during the crisis. After the immediate impacts of the crisis was brought under control in 2000, coverage reverted back to 6 months. From 1998 to 2000, 636,040 employees were laid off.21 At the OEM, social security benefits and coverage were being reviewed for possible revision. 31. To meet the commitment to create jobs for people laid off during the crisis, the Government launched three employment schemes in March 1999 that aimed to provide temporary work. Jobs were not created directly by SSP. An economic stimulus and job creation package funded by JBIC and the World Bank contributed B24.8 billion (of a total of B53 billion) to create 86,000 jobs for skilled workers and 400,000 jobs for unskilled workers.22 Employment and training projects supported by SSP through government counterpart funding employed 13,619 people and trained an additional 28,445. The third major employment package, the World Banks Social Investment Project, created another 348,159 temporary jobs. The three employment programs created jobs for 2.7% of the people working in Thailand during the third quarter of 1999 (Appendix 7, Table A7.1).23 32. A set of reforms under the policy matrix sought to protect the poor in the informal sector and rural areas by making poverty programs more effective. To improve the targeting of poverty programs, SSP aimed to transform the budgeting system. Before the SSP, funds were allocated for poverty reduction based on the population of the provinces. The new system required budgets to be formulated based on the incidence of poverty in each province. BOB and NESDB
19

The PCR reported that, between late 1997 and the end of 1998, CALOWs assisted 16,000 persons in finding jobs, counseled close to 40,000 walk-ins (52% were women), and helped more than 60,000 others by telephone. 20 From 2001, MOLSW became MOL, and the social welfare office was dissolved. 21 Ministry of Labor. This number is not an accurate means for determining how many laid-off workers received extended social security coverage, because the figure also includes people dismissed for reasons that would not necessarily qualify for receiving benefits. 22 World Bank. 1999. Thailand Economic Monitor, Second Quarter 1999. Washington D.C. 23 This is based on the job creation figures divided by the total number of people employed (31.9 million people, according to National Statistics Office data).

10 prepared guidelines on pro-poor budgeting for the ministries, and the new system began in FY1999. The OEM found that this system continues to be used. In FY2004, the Government allocated B79.14 billion as subsidies to the Local Administrative Organization for (i) providing public services at the standards set by the Government, (ii) resolving local problems that might exceed their fiscal capabilities, and (iii) supporting projects in harmony with the budget allocation strategy. 33. Another set of reforms under SSP was designed to promote private sector investment in training employees. The Government simplified the procedures for tax deductions for employers under the Vocational Training Promotion Act, which was reformulated as the Skills Development Promotion Act in 1999. A Skills Development Fund (SDF) was to be created, which would receive contributions from private firms.24 However, the SDF law will not be implemented until 2005. MOF has to issue four ministerial regulations related to SDF, inlcuding tax exemptions, before it takes effect. MOL estimated that 1,700 firms will borrow from SDF to provide training for 90,000 people in the first year of its implementation. Eventually, at least 2 million people are expected to benefit from private sector training supported under the law. This would be a major, positive development if the SDF law is implemented. 34. The last set of policy conditions for labor and social welfare sought to improve the competitiveness of the labor force. This entailed maintaining the minimum wage in accordance with the Governments November 1997 agreement with IMF, and cabinet approval of a labor action plan to improve competitiveness. Since many companies had closed, the Government maintained the minimum wage25 for 1998 at the previous years level. A labor action plan was developed covering five components: (i) improvement of labor legislation and regulations to eliminate duplication, support investment, and protect employees rights; (ii) improvement of wage policies; (iii) improvement of the Employee Assistance Schemecovering social security, and labor protection for formal and informal sectorsto eliminate duplication and to account for production costs; (iv) promotion of labor relations among employers, employees, and respective organizations for the mutual benefit of all; and (v) acceleration of improvements in skill levels of the Thai workforce to international standards in line with the demands of a productive sector. The labor action plan, which had been approved by the previous Government, was not implemented due to the change of Government in 2001. 2. Education

35. In the education sector, the five policy priorities were (i) reducing the incidence of dropouts from the school system due to financial difficulties; (ii) improving the quality of priority education programs through a better allocation of resources; (iii) rationalizing the staff size, deploying more staff to rural areas, and establishing a new personnel management framework in line with the Governments general decentralization policy to delegate greater authority and responsibility to local governments; (iv) decentralizing financial and management authority to make all levels of education more responsive to societal and community needs; and (v) promoting private sector provision of education and training. 36. The budget for student loans was increased to address the problem of students dropping out because of financial difficulties. The assumption was that an expanded student loan program would provide sufficient support to families to keep their children in school. From 1997
24

Companies will be required to contribute to SDF if they do not provide training or offer an inadequate amount of training as specified by law. 25 The range of minimum wage from 19982000 in all provinces was between B130 to B162 per day.

11

to 2000, the Government had doubled the size of the loan fund. The number of students (new and old) receiving loans increased every year between 1997 and 2002, more than doubling during that period (Appendix 7, Table A7.2). In April 2004, the Council of Ministers dissolved the Education Loan Fund, replacing it with the Income Contingent Loan (ICL) Fund. ICL Fund26 was designed as a mechanism for changing from a supply-side system to a more demand-side budgeting system. It also aimed to increase the students share of higher education costs, and produce graduates in areas most suited to the countrys economic and social needs. ICL Fund offers loans only to students wishing to enroll at higher education levels. 37. The quality of priority education programs was to be enhanced through a set of policy reforms (Appendix 3). Two of the mandated policy actions involved maintaining and monitoring expenditures for science, mathematics, and foreign languages, including teacher training. These policies were not maintained. Budgets for science from the Office of Basic Education have been erratic since 1998. Budgets for teacher training for science and foreign languages did not exceed 1997 allocations until 2003. The Government budget for education shrank in 1998 due to the impact of the crisis. However, the proportion of the budget allocated to the education sector was largest among all sectors in 2000 at 25.7%, before declining to 21.8% in 2002. In 2004, 24.4% (B251.2 billion) of the national budget was allocated to education.27 38. As required under SSP, the Office for National Education Standards and Quality Assessment (ONESQA) was established in 2000 to measure educational quality. All primary schools are to be subject to an external evaluation from ONESQAs certified evaluators by August 2006a year later than required under Chapter 6 of the National Education Act of 1999 (NEA). As of the end of 2003, 8,856 basic education institutions (23% of the total) had been inspected. The results of these assessments were not available during the OEM. 39. SSP also intended to shift more students into general education28 by increasing the upper secondary budget by at least 5% relative to vocational education in FY1999.29 The actual 3.6% budget increase fell short of the target in 1999, partly because pre-crisis budgets had allocated significant resources to vocational education. From FY1999 to FY2004, the budget for vocational education declined nearly 19%, and its share of the MOE budget dropped from 7.8% to 6.0% over that period.30 The OEM was advised that the Government is planning to increase the vocational education budget. 40. One of the measures to rationalize MOEs staff size was to control the number of new primary teachers hired starting in FY1998. The aim was to achieve a student-teacher ratio of 25:1 at the primary level by FY2002. The primary level student-teacher ratio for 2002 and 2003 demonstrates that minimal progress has been made in this area. The ratio was 19:1,31 up from 17:1 in 1998, but well short of the SSP target.

26

Under this scheme, the Government will advance tuition fees to students in each higher education institution through the ICL Fund. Students pay back their loans according to their future income. 27 Office of the Education Council. 2004. Education in Thailand 2004. Ministry of Education, Thailand. p. 53. 28 The erosion of Thai economic competitiveness in the wake of globalization was attributed partly to the inappropriate quality of its human resource base. Shortages of trained personnel in technical and scientific areas can be traced to the traditionally weak emphasis on science and mathematics in basic education, and low output of higher education graduates in science and engineering programs. 29 The reason for this was the disproportionate number of students entering vocational schools, and fewer students pursuing higher education. 30 See Appendix 8 on vocational education. 31 Office of the Education Council. 2004. Education in Thailand 2004. Bangkok.

12 41. Another reform to rationalize MOE staff was the requirement that the cabinet approve draft legislation for a new personnel administration and salary system, and a plan to reduce MOEs administrative staff by at least 25%. Draft legislation for the new personnel administration and salary system outside the civil service system was prepared during SSP. After the Program was completed, the draft legislation was revised. However, Parliament did not enact the legislation. The plan approved under SSP to reduce MOEs administrative staff was abandoned, replaced in 2004 with a new plan to reduce the staff by 33%. The OEM was not able to obtain the figures for administrative staff in 1997 and 2004. The Government was concerned that disclosure of this information would create the perception of layoffs. 42. Parliament has not enacted draft legislation prepared during SSP to decentralize basic education to provincial and local administrative organizations. However, a new 15-year decentralization plan (200216) provides for transferring authority of schools gradually from MOE to local authorities. This is consistent with the intent of the SSP, though substantive implementation has not begun. 43. The delegation of more authority to vocational schools has been limited. The Government is committed to giving vocational schools autonomy over curriculum matters, cost recovery, and personnel and financial management. While vocational schools now have the authority to determine their curriculums, they lack control over the personnel and salary system. Full autonomy for vocational schools awaits a parliamentary decision. 44. At the higher education level, the Government was required to (i) grant universities control over their non-salary current budget, (ii) establish a performance-based monitoring system, (iii) commit to making all public universities autonomous by 2002, and (iv) grant one public university autonomy by the end of 1998. Universities received control over their nonsalary current budgets, and reallocate at least 5% of their overall budgets among different budget items. As of 2004, universities controlled approximately 10% of their finances. The first round of the performance-based monitoring system for universities was completed in 2003. However, the OEM concluded it was too early to assess the impact of these reforms on accountability and transparency related to the use of finances at the university level. 45. Only one university, King Mongkuts University of Technology, gained autonomy in 1998.32 In May 1999, the cabinet approved the Ministry of University Affairs autonomy master plan, which would have made all universities autonomous by 2002. However, the master plan was abandoned as university staff resisted the changes due to (i) unclear policies, (ii) differences within the universities on the autonomy plans, (iii) lack of understanding of the meaning of autonomy, and (iv) concerns over job security. The Office of the Higher Education Commission reported that these issues have been resolved, and most universities are now willing to become autonomous. Parliament is considering the autonomy plans of 4 of the 11 universities that have been submitted. Ten other universities have not submitted autonomy plans. 46. To promote the participation of the private sector in education, the Government completed two main actions under SSP. First, the Government amended the B20-billion Human Resources Development Fund to make it more accessible to private schools that wish to draw funds and build new structures. Second, the cabinet adopted a policy to prevent the Government from overcrowding private schools at all levels of education. SSP-linked reforms to promote the private sector in providing education included allowing private schools to establish
32

See Appendix 9 for a summary of King Mongkut Universitys autonomy experience.

13

their own fee structures, and ensuring that private schools have the same registration and accreditation systems as public schools. In addition, private educational institutions were exempted from taxes on operating profits, including those from books and material sales, dormitories, and cafeteria services. Tax exemptions also were given for dividends earned from shares in educational institutions. Passage of the Private Higher Education Institutions Act in 2003 was beyond the scope of SSP reforms. Private schools are allocated the same per capita subsidy from the Government as public schools. These measures have helped to improve the enabling environment for the private sector in education. 3. Health

47. Priority policy actions in the health sector aimed to (i) protect the poor; (ii) shift the budget focus towards programs for women and children, and HIV/AIDS (human immunodeficiency virus/acquired immunodeficiency syndrome); (iii) improve health care service delivery in rural areas; and (iv) enhance efficiency in health care delivery by restructuring hospitals as corporations. The budget and coverage of two health care schemes for the poor were expanded during the SSP. The budget for the Public Assistance Scheme33 increased by 56.9% from 1997 to 2000. The scheme, which covered 25.7 million in 1998, added 3 million people in FY1999. The Voluntary Health Card scheme,34 which had 2 million cardholders covering 9 million people in 1997, also was expanded. Its budget more than doubled (an increase of 109.4%) between 1997 and 2000. More than 12 million additional poor people benefited from better access to health care during SSP. The B30 policy, which covers all Thais regardless of income, has replaced these two health care schemes. The new policy goes beyond SSP in terms of coverage. However, the OEM found that older people in rural areas do not favor the new program since they have to pay B30 per hospital visit. Under the previous policy, they would pay only what they could afford or would receive treatment for free. On the positive side, if they are hospitalized or require surgery, they pay a maximum of B30.35 However, most older Thais would rather stay at home in the care of family than be hospitalized. They commonly consult a doctor for medical prescriptions, meaning hospital visits can be frequent. Another drawback of the B30 policy is bureaucracy. Beneficiaries reported that the waiting time for medical services under the new scheme is very long, sometimes lasting all day. 48. The HIV/AIDS budget fell below the FY1997 level in FY1999 (Appendix 7, Figure A7.1). Despite the drop in overall HIV/AIDS funding, prevention activities as a percentage of the total HIV/AIDS program in FY1999 remained at the FY1997 level of 10.9%. Combined with advocacy and awareness campaigns, this contributed to the continued success in reducing new infections,36 as well as maintaining care for those who are infected. Between FY1998 and FY2004, the budget allocations for AIDS prevention did not reach the FY1997 level. Likewise, the annual budgets for AIDS patient treatment through FY2004 never surpassed the level of FY1997. Budget allocations to the Department of Disease Control for all immunizations grew by 58% from FY1998 to FY1999, and peaked at B1.04 billion in FY2000. However, cutbacks in 200103 reduced the Departments budget to B320 million, about one third of the peak level in
33

The focus of the Public Assistance Scheme includes programs for women and children, such as maternal and child health, essential vaccinations, prevention, community development, and NGO activities related to HIV/AIDS. 34 The voluntary health card costs B500 per year for each family holder. The B30 policy health care scheme replaced the SSP health schemes in 2001. The new health scheme was implemented gradually in April 2001, and expanded to the whole country by the end of 2002. 35 For poor Thais over 60 years old and under 12 years old, a gold card can be issued that exempts them from paying for medical services. However, not all old people are aware of this scheme. 36 The exact percentage in 1999 was 10.8% of the total HIV/AIDS budget. United Nations Development Programme. 2004. Thailands Response to HIV/AIDS: Progress and Challenges. Bangkok.

14 FY2000.37 In FY199899, the budget surpassed the FY1997 levels, most likely due to the injection of funds from SSP. The allocation in FY2000 fell below the base year before exceeding that level again in FY2001. Maternal and child health budgets have not been strengthened consistently or protected since the crisis. However, as a whole, the appropriation for the health affairs and services budget increased from B72.7 million in 2002 to B83.6 million in 2004.38 This is compatible with continued government support to the sector. 49. The health policy priority in SSP to improve health care service delivery in rural areas required the Government to prepare an action plan with mechanisms to redeploy health personnel to rural areas. The cabinet approved the action plan39 in May 1999. However, the plan was not implemented. 50. To improve efficiency in health care delivery, SSP required the restructuring of hospitals as corporations. One public hospital, Ban Phraeo Hospital in Samut Sakhon, was restructured in 1998 and became autonomous in October 2000. It remains the only corporatized40 hospital in Thailand.41 The cabinet approved a draft action plan for seven hospitals to gain autonomy in May 1999. However, differences within the cabinet resulted in the other six hospitals not being corporatized. The director of Ban Phraeo Hospital reported improved efficiency in providing health services and managing its financial situation. Because of the improved services compared to government hospitals, private individuals had offered grants and funding support to Ban Phraeo. These positive developments suggest that restructuring hospitals as corporations is worth pursuing. B. Performance of the Operating Entity

51. As the Executing Agency, MOF established a steering committee, chaired by the deputy prime minister, to make decisions. MOF also established a coordinating body, NESDB, to oversee the daily operations in coordination with line ministries. In the early part of SSP, the committee met regularly as needed when called by the chair. The frequency of meetings declined after the release of the second tranche and as the crises abated. Proposals for project funding from line ministries went through a screening body headed by MOF. Due to the complexity of the Program and the numerous bodies responsible for multiple activities, monitoring and reporting were important. However, the system did not function as efficiently as planned. Line ministries treated the activities as normal projects of their respective agencies, and were not clear about the policy matrix and loan commitments needed to ensure better outcomes of such activities. C. Performance of Technical Assistance

52. Three TA grants, totaling $2.1 million, were provided to support the policy reforms prescribed in SSP: (i) Capacity Building for Social Sector Reforms (TA 2995-THA),42

37 38

As reported by the Ministry of Health. Bureau of Budget. 2004. Thailands Budget in Brief, Fiscal Year 2004. Bangkok. 39 This was developed through TA 2997-THA (ADB. 1998. Technical Assistance to the Kingdom of Thailand for the Health Management and Financing Study. Manila) for $700,000, approved on 12 March 1998. 40 In the context of SSP, corporatize means management of a public or government owned entity in a commercial manner, where the entity is responsible for controlling and raising their own human and financial resources as in private sector, although it may still receive government subsidy. 41 See Appendix 10 for Ban Phraeo Hospitals autonomy experience. 42 TA 2995 was provided by a firm, for 52.2 person-months.

15

(ii) Education Management and Financing Study (TA 2996-THA),43 and (iii) Health Management and Financing Study (TA 2997-THA).44 While the first two TAs were successful, the last one was not. The first TA strengthened the Governments planning and management capacity to evaluate the impact of the crisis on social welfare, employment, education, and health. The second TA mainstreamed reforms in education. The last TA failed to achieve its objectives, and had minimal institutional impact. A complete discussion of these TAs and their rating is in Appendix 5. IV. A. PROGRAM OUTCOMES

Achievement of Development Impacts45 1. Mitigation and Social Impacts

53. The program framework for SSP is in Appendix 1, while the summary of activities and actual project costs is in Appendix 2. One of the three main goals of the Program was to address the adverse social impacts of the financial crisis in Thailand and the underlying social sector causes. Thailand generally was successful in mitigating the immediate adverse social impacts of the crisis. Given the depth of the crisis, this was a major accomplishment. SSP was part of the package of assistance that made this possible. Notable progress has been made in strengthening the social safety net, particularly in targeting poverty funding better, extending health coverage for the poor, and providing broader coverage for social security. The newly reelected Government recently announced that it would spend up to B1.5 trillion ($39 billion) on national development and pledged to eradicate poverty within 6 years by focusing on raising overall living standards in deprived rural regions.46 54. The mitigation of the short-term impacts of the financial crisis is most apparent in the labor and social welfare sector. Three basic groups were affected: (i) salaried workers in the banking and financial sector, (ii) workers in export enterprises, and (iii) informal or home-based workers. The first two groups were covered by social security under the Labor Protection Act of 1998. The last group was not, and thus relied mainly on family support and social networks. In 1999, a National Statistics Office survey estimated that 3.6 million workers, 30% of the Thai labor force, received less than the minimum wage.47 Unemployment rates dropped consistently after 1998 (Appendix 7, Table A7.1). While employment programs helped mitigate the adverse impacts of the crisis, the recovery of the economy, in general, and the private sector, in particular, were major factors as well. 55. Mitigation measures in the education sector, including the help of an expanded student loan program, to prevent declines in completion and transition rates, were not consistently successful. The transition rate to upper secondary education in 2001 was below the 1998 rate, and the completion rate fell sharply in 2000 from a year earlier before recovering in 2001. The completion rate of primary education in 2001 dropped below the 1999 level following an increase in 2000. Transition rates to lower secondary education fluctuated during the crisis
43 44

TA 2996 was provided by UNESCO for 49.8 person-months and individual consultant for 1 month. TA 2997 was provided by a firm, Management Sciences for Health, for 45.2 person-months. 45 The estimated cost of reforms under SSP is in Appendix 11. 46 Oxford Analytica. 1 April 2005. 47 Many of the laborers opted to accept lower wages rather than lose their jobs. Others agreed to forego some social security benefits to continue working, as many companies closed or scaled back their operations due to the economic crisis.

16 years of 19982000 (Appendix 7, Figure A7.2). Gains in the transition rate to lower secondary level were not consistent until academic year 20022003. However, the transition rate to upper secondary education still fluctuates and remains below the pre-crisis level. The OEM concluded that other factors must be at work, contributing to these less than satisfactory outcomes, which the expanded loan program was insufficient to solve. With the passage of NEA, the Government committed to support 12 years of education for all children and support to higher level students including those in vocational schools. Students who cannot avail of an ICL loan are eligible for scholarships. Students in elementary schools visited by the OEM have been provided with milk and lunch programs, which are helpful in preventing school dropouts and contribute to better child nutrition. 56. The mitigation of potential adverse effects on the health of the population was somewhat successful. However, these achievements would have occurred without the Program, as the health programs were mainstreamed before SSP. HIV/AIDS budgets during the crisis were not maintained at the FY1997 level (para. 48), though the lower spending did not lead to a higher rate of new infections (Appendix 7, Figure A7.3). The budget allocation for national AIDS prevention and treatment fell by 23% between 1997 and 1999. However, Thailand lowered the annual number of new HIV infections between 1996 and 2003, a trend that has continued since 1992. This achievement suggests that the Government has found or maintained more targeted and efficient ways to prevent HIV infections that do not require increasing expenditures. 57. For maternal and child programs, budget allocations to the Department of Disease Control for all immunizations grew by 58% from FY1998 to FY1999. However, coverage rates for key childhood immunizations, such as DPT3 and polio, and maternal-related immunizations did not increase (Appendix 7, Table A7.3). The percentage of people covered by selected immunizations fluctuated between 92.5% in 1997 and 89.3% in 2002. 58. The impact of the budget changes on the mortality rate for children under 5 and maternal mortality rate (MMR) is unclear. Improved data collection methods starting in 2001, which show higher MMR in 2001 and 2002 than before (Appendix 7, Table A7.4), obscure the picture further. MOPH asserts this increase represents better reporting, not an actual worsening of MMR. 59. The OEM made a limited assessment of the impact of the Program on vulnerable groups that were provided assistance under SSPs welfare schemes. These groups consist of households headed by women, children, the elderly, and the handicapped. During interviews with these groups and with NGOs working with them, the OEM found that support during the crisis was adequate. However, it diminished after the Program closed. The Labor Protection Act of 1998 only covered workers in the formal sector, not the estimated 30% of the Thai labor force that works in the informal sector (e.g., home and cottage industry workers). With the introduction of the new Governments policy one tambon, one product,48 separate from SSP, some home workers, who are mostly women and the elderly who were producing different products, lost trade due to competition and the new policy. Overall, SSP mitigated the adverse impacts of the crisis on vulnerable groups but with some limitations. This is discussed in more detail in the supplementary appendix.

48

Under this policy, each tambon (village) is encouraged to produce and specialize in only one productthat which the village has a competitive advantage in producing. The Government provides the marketing support and quality control. If a certain village is producing one particular product, all village workers will only produce this particular product, and nothing else.

17

2.

Enhancement of Competitiveness Through Human Resource Development

60. The second purpose of the Program was to enhance competitiveness through human resource development. SSP policy and outputs have not contributed substantially towards this objective, either because the reforms have not been fully implemented, or the SSP conditions and/or actions were inadequate. Labor unions and the Government resisted the condition to rationalize minimum wage to enhance export competitiveness. Given the high number of companies that went bankrupt during the crisis, employers and employees agreed to flexible arrangements to prevent layoffs. These included reduced working hours or reduced social benefits. Forced to choose between losing jobs and lowering wages and benefits, many laborers chose to survive. SSP provided support for those who lost their jobs, although this was a mitigation measure rather than an enhancement of labor competitiveness. 61. Simplified procedures for obtaining tax deductions for worker training resulted in more companies sending workers for qualified programs of MOLSW. The number of companies sending workers for training rose from 69 in 1997 to 271 in 1998, while the number of workers trained increased nearly four-fold from 51,702 to 199,592. Between 1998 and 2002, an average of 244 companies and 200,589 workers participated in training annually.49 The simplified procedures had the desired effect of persuading more firms to send their workers for training under MOL programs. The crisis likely raised awareness among businesses of the need for ongoing training to enhance competitiveness, a result that could be attributed partly to SSP. 62. The Program was expected to enhance long-term competitiveness by improving the quality of priority education programs. However, the national test scores of students in science, mathematics, and English have not improved significantly. Although national aptitude test scores are confidential and not released publicly, the Office of the Education Council acknowledged that the national average scores have been about the same for the past 5 years, and are still below the expected achievement levels. 63. A greater emphasis on general education was another way to help Thailand improve competitiveness. The ratio of upper secondary students in general education to vocational education increased from 2.47:1 in 1999 to 2.71:1 in 2002.50 The Government diverted more upper secondary students into the general education stream. 64. Overall, the second objective of SSP to initiate structural reforms to enhance the competitiveness of the Thai economy was partly achieved. 3. Reduction of Inefficiencies in Social Services

65. The reduction of inefficiencies in the provision of social services has been limited. SSP reduced inefficiencies by promoting private sector education provision and improved pro-poor resource allocation. However, larger issues, such as education decentralization, rationalization of social services, and widespread hospital autonomy have not been achieved. 66. The record indicates that the Human Resources Development Fund had a limited impact on promoting private schools. Due to stringent requirements, few schools have been able to access the fund. As of 2002, MOE estimated that only B500 million had been borrowed.
49 50

Based on figures provided by MOL. Calculations based on data from the National Statistical Office and the Office of the Vocational Education Commission.

18 Although no borrowing targets were set under SSP, ministry officials considered the amount borrowed by private schools to date low. 67. Two other key indicators suggest that the actions taken to promote the private sector in education were partially successful. First, the number of international schools in Thailand increased from 46 in 1999 to 89 in 2003. Second, enrollments in public vocational schools fell by 25,421 students in 2003, while private school enrollment grew by 10,870.51 Appendix 7 (Table A7.5) shows the enrollment data from 2001 to 2003. 68. Under the revised poverty budget allocation measures, poorer provinces have received a larger proportion of ministerial budgets since FY1999. The poverty incidence fell from 14.2% of the population (8.9 million people) in 2000 to 9.8% (6.2 million) in 2002 (Appendix 7, Figure A7.4, and Appendix 12, Table A12.1).52 Determining SSPs contribution to this improvement is difficult. While part of the reduction in the poverty incidence could be attributed to better targeting and more efficient allocation of poverty budgets, other factorsparticularly the recovery of economic growth and job creation in the private sectorwere probably more important. 69. The ratio of professional health staff per 100,000 people outside of Bangkok improved slightly, even without the implementation of the SSP health action plan. For provinces other than Bangkok, the biggest gain since 1997 has been in the number of nurses per 100,000 people, which rose from 75 in 1997 to 101.5 in 2001 (a 35% increase). However, the overall production of nurses has been rising for the past 6 years. The number of nurses per 100,000 in Bangkok increased even faster at 77% between 1997 and 2002. The disparity between the number of physicians per 100,000 in Bangkok and the other provinces appears to be shrinkingfrom 16 in provinces and 138.9 in Bangkok for 1997 to 20.5 in provinces and 57.1 in Bangkok for 2003. The figures for dentists show the same pattern (Appendix 7, Table A7.6). B. Policy Reform Measures

70. At the macro level, the economic crisis and the conditionalities associated with SSP and assistance packages from other international financial institutions compelled the Government to adopt a wide range of policy reforms. These reforms affected the four dimensions of governance: transparency, predictability, accountability, and participation. The role of the central Government in the social sectors was reduced, while broader participation of the private sector, NGOs, provincial governments, and local communities was promoted. Extensive reforms in the social sectors since the implementation of SSP are still unfolding, and have not been achieved fully. 71. The policy reforms and action plans that were highlighted during the financial crisis are likely to be sustainable. The overall goals of the reforms facilitated by SSP generally have been maintained, although the process to achieve them has changed. In education, the Government revised almost all the laws submitted to Parliament as drafts in 2001. However, the types of education legislation, particularly those pertaining to decentralization of the education system, remain broadly similar to the SSP objectives. Parliament is expected to adopt these laws in 2005. Funding for the student loan scheme increased steadily through 2002. The Government is
51

Based on data from the National Statistics Office and the Office of the Vocational Education Commission. These figures exclude students enrolled in short courses. 52 Office of the National Social and Economic Development Board and United Nations Country Team in Thailand. 2004. Thailand Millennium Development Goals Report. Bangkok.

19

preparing a new loan scheme for higher education in 2006. The Government remains committed to reducing the size of MOE and setting a higher target for staff reduction than proposed by SSP. 72. One of the Governments highest priorities is to eliminate poverty by 2009. The Government has introduced new approaches beyond those contained in SSP, and has committed significant amounts to poverty reduction schemes and programs. In March 2003, the Government launched a new action plan for developing Thailands labor force to make it more competitive in the knowledge-based economy. 73. Current reforms in the health sector encompass the priorities of those in SSP. Budget allocations for the B30 health care policy have grown each year since its introduction in 2001. These large cash injections to cover the costs of the scheme reflect the high profile of this initiative and the Prime Ministers personal commitment. 74. Overall, the third objective of SSP to reduce inefficiencies in the provision of social services is rated as being partly achieved. C. Socioeconomic Impact

75. The socioeconomic impact of SSP was generally positive for the poor and vulnerable groups due to the mitigation measures incorporated in the Program design. However, this was limited during the early years of the crisis. One of the greatest achievements of the Government was the quick mitigation of rural poverty after 1999 (Appendix 12, Table A12.2). Before the financial crisis, the incidence of rural poverty was around 15% of the population. At the peak of the crisis in 1999, more than 20% of the rural population lived in poverty. The poverty level dropped to 17% in 2001 and to 13% in 2002. The Asian financial crisis initially was thought to have the heaviest direct impact on the urban population, and the emerging middle class. However, Thai figures on poverty indicate that the rural population, including the rural poor, likewise suffered because of the crisis. SSPs impact on the poor was positive, but short-lived. 76. The crisis also was perceived to have an impact on the urban middle class. Many faculty and staff considered university autonomy a threat to their jobs and privileged status. In response to their strong resistance, the Government deferred its plan for university autonomy. The targeted 25% staff reduction in MOE also met with resistance, although cost-saving measures clearly were needed. Approximately half of the staff of Ban Phraeo Hospital transferred to another hospital within the government system instead of risking the uncertainty that hospital autonomy might bring. Similar concerns at other hospitals effectively delayed the implementation of the hospital autonomy plan, despite the resulting improvements in efficiency at Ban Phraeo. Labor groups opposed the rationalization of the minimum wage as required by IMF and contained in the SSP policy matrix. Labor leaders argued that IMFs minimum wage condition was illegal and impractical to implement. In the end, it was not carried out. 77. Given the discussions above, the socioeconomic impact of SSP is assessed as being moderate. D. Environmental Impact

78. SSP did not have any direct implications on the environment, and none of the projects or activities under the Program had adverse consequences on the environment.

20 V. A. Relevance OVERALL ASSESSMENT

79. The Program was relevant at the time of approval, and remains relevant. Its longer-term relevance is evident in the goals of the Ninth Economic and Social Development Plan, which provides a general framework for the socioeconomic development of Thailand. The plan increases the emphasis on improving social welfare, and providing better health, education, and labor services. B. Efficacy

80. SSP is rated as less efficacious. The achievement of two of the Programs three purposes fell short. The first purposeto mitigate the impact of the financial crisiswas achieved, although with limitations. The other twoenhancing competitiveness of human resources, and reducing inefficiencies in social services provisionwere partly achieved. The success of the Governments broad program to mitigate the impact of the financial crisis on the social sectors was a result of the collaboration of agencies. ADB, IMF, World Bank, and United Nations institutions actively coordinated with the Government during the formulation of SSP. However, communication and coordination among funding agencies during program implementation was minimal. C. Efficiency

81. The Government was successful in mitigating the immediate social impacts of the financial crisis in a reasonably timely manner. SSP provided some of the necessary short-term budgetary support. The specific action plans required under the SSP were made available within the target deadlines. However, many key reforms, particularly in the education and labor sectors, were not completed or implemented. The action plans remained plans. Monitoring and reporting were not done systematically. After the consultant in NESDB completed her contract to monitor the program, no follow-up monitoring was done. As such, data was unavailable to verify activities after program completion. The actual cost of the SSP-supported reforms was estimated to be at least $759 million, two thirds of which was covered by the $500 million loan.53 SSP is rated less efficient, particularly due to the lack of monitoring after program completion. D. Sustainability

82. With the new Governments commitment to the underlying principles of the policy reforms under SSP, and the increasing levels of funding for key social sector programs, sustainability is likely. During the crisis, the Government financed priority programs, such as the student loan scheme, scholarships for the poor, immunization, and HIV/AIDS activities. SSPcompatible reforms in the education, labor, and health sectors are in process, with pending approval from the cabinet. In addition, the Government set higher targets for health coverage, and expanded the number and types of poverty programs and their coverage. E. Institutional Development and Other Impacts

83. The impact of the Program on some government institutions was moderate. MOF cited the experience gained in dealing with the first social sector program loan. MOPH credited the
53

See Appendix 11 for details of the estimate.

21

Program for providing experience on per capita financing in the health sector. NESDB acknowledged an improvement in its capacity to monitor the social sector, along with more effective targeting of poor and other vulnerable groups. However, the knowledge gained from the TAs did not have a major impact on the relevant institutions. The results were not disseminated well, confined to a small number of people in high positions. Although capacity building occurred, some local authorities have raised concern by taking on more powers without sufficient management skills, efficient service provision, and targeting. F. Overall Program Rating

84. Overall, SSP is rated partly successful. It achieved one of its three main objectives: to respond to Thailands immediate needs during the financial crisis and mitigate the social costs of the crisis. However, the longer-term needs of the social sector embedded in the other two objectives were not achieved fully. The reduction in inefficiency in social services and the development of competitiveness through better human resources are still works in progress. The Government continues to implement a broad range of policies that are consistent with the achievement of these objectives. G. Assessment of ADB and Borrower Performance

85. The Governments overall performance was partly satisfactory. On the positive side, the Government demonstrated strong commitment to the reform process at the highest level. When the new Government took office in 2001, social sector reform remained a priority, and efforts were made to improve the labor and welfare, education, and health sectors. The Governments ability to implement the Program in a timely manner, and its overall compliance with the policy matrix and covenants of the loan were positive outcomes (Appendixes 3 and 4). 86. On the downside, activities did not continue as planned after program completion. The results of the TAs were not disseminated effectively throughout the line ministries. Only small groups of officials involved in carrying out the program activities benefited from the TAs. As such, SSP, its intentions and purposes, and justifications were not widely understood. Government officials involved with implementation lacked strong agreement on, and ownership of, the action plans. The OEM believes that the action plans were accepted largely because they were conditions of the loan, not because the Government was a full partner in their development and owned them completely. Given this conclusion, the decline in interest in the policy conditions and activities under SSP as the crisis gradually abated is not surprising. The drop in interest also was reflected by the declining number of reports, and the lack of monitoring after the consultants assignment with NESDB ended. 87. ADBs overall performance also is rated partly satisfactory. ADB responded quickly to the financial crisis, and released the first tranche expeditiously. Given the impact of the Asian financial crisis on the Thai economy, ADB needed to make funds available quickly as part of the IMF-led rescue package. However, program preparation was not comprehensive. Although timing was an issue, and ADB responded well in such a short period, preparation could have been better. The Program could have included a proper needs assessment with more appropriate action plans, implementation measures, and systematic monitoring system. The implementation of complex, policy-oriented program loans requires intensive supervision and continuous policy dialogue, particularly in cases where ADB does not have deep country experience in the sector. ADBs supervision during implementation was inadequate. Except for the PCR mission, ADB did not field any missions after the second tranche was released.

22 Implementation and reporting were not carefully monitored and maintained. The lack of intensive supervision contributed to the limited impact of $2.1 million in TAs, and the Governments declining ownership of SSP.

VI. A.

ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

Key Issues for the Future

88. Weak Monitoring System. One of the Programs weaknesses was the monitoring system. The PCR recommended future monitoring. An earlier ADB study in 1999 also cited the weak monitoring system of SSP.54 After program completion, the continuity to maintain records was lacking, as implementing line agencies were unaware of the conditions of SSP. Because the monitoring system was flawed, post-evaluation was very difficult and time consuming. The OEM relied on the triangulation method (footnote 11) to undertake its work and develop its conclusions. Monitoring of sector development programs is complex and requires adequate resources. While the Government agreed in principle to monitor the Program, it did not provide adequate resources and qualified personnel to carry it out. SSP did not fully comply with Section 4.04 of the Loan Agreement.55 However, a time frame for keeping records was not agreed upon in the legal documents. Without such specification, the Government can discard records according to its normal practice. Thus, a time frame for record keeping should be agreed upon for future program loans. 89. Decentralization of Health and Education. In SSP, decentralization was viewed as one way to improve governance in the health and education sectors. ADBs experience in other countries (e.g., Indonesia and the Philippines) showed that successful decentralization is a long and complicated process. It involves building capacity at the local level, and transferring the functional responsibilities and associated budgetary resources from the central Government. Several issues can hinder the implementation of decentralization: (i) lack of supervision, (ii) lack of good governance, (iii) limited administrative capacity, (iv) absence of minimum standards, (v) structural problems on how to channel funding to the local governments efficiently, and (vi) mismatches between local expenditure responsibilities and revenue sources. Because the processing of SSP was rushed, the program design neglected the role of local governments. SSPs design was not based on a sufficient analysis of the issues related to decentralization, and it failed to build the necessary partnerships or links between national and local institutions. The role of local governments in providing education services and restructuring hospitals as corporations needs to be clearly defined and carefully analyzed if ADB plans to support decentralization initiatives in the future. 90. Technology and Capacity Building. One of SSPs conditionalities was the enhancement of labor competitiveness through training in information technology. Although equipment for training were made available, only a limited number of trainees were trained and thus there is limited impact. MOL believes that this is a key factor affecting competitiveness and labor productivity. Access of students to higher education is critical to prepare future workers for the demands of the labor market. Most schools have limited capacities to upgrade their technologies. With rapid changes in technology, equipment in schools becomes outdated
54

ADB. 1999. Special Evaluation Study Interim Assessment of ADBs Lending to Thailand During the Economic Crisis. Manila. 55 Section 4.04 stipulates that, except as ADB might otherwise agree, the Borrower shall maintain, or cause to be maintained, records and documents adequate to identify the eligible items financed out of the proceeds of the loan, and to indicate the progress of the Program.

23

quickly. Further, the skills of information technology teachers need to be upgraded. Hence, the provision of new technology must be linked with training. Over the past decades, the focus on primary education yielded high enrollments and a reduction in illiteracy. However, enrollment rates in Thai secondary education are low, and the sector has a shortage of teachers. The quality of secondary education needs to be improved if Thailand is going to enhance its competitiveness. Special programs and/or campaigns are needed to address these issues. With local governments and local institutions gradually assuming responsibility over most education matters, capacity building and training are needed early on. Enhancing the capacities of institutions in managing the finances, administration, curriculum development, and internal quality control is as necessary as training people. 91. Health Care Reforms. Thailand is shifting the emphasis in its health system from curative care towards preventive care. Preventive care usually results in significant cost savings for patients and providers alike, and substantially increases labor productivity by reducing the time lost from work due to illness and increasing outputs. MOPH is preparing to launch health promotion programs, which will need cooperation from other ministries and the private sector to build public awareness and support. For the B30 health policy and operational scheme, the Government will have to ensure a standard quality of health care across the country in the future, particularly at the primary health care level. The quality and types of services available in urban and rural health care facilities differ significantly. Thailand will need to promote standard quality for health services and standardized monitoring of health facilities, particularly in the rural areas. Restructuring public hospitals in Thailand as corporations is another pending issue that needs attention. B. Lessons Identified

92. Based on the experience gained in supporting developing member countries (DMCs) during the Asian financial crises, ADB developed a new program lending product in October 2003. The special program loan (SPL) is used for emergency lending to a DMC in times of crisis and is characterized by its short-term time horizon, large size, quick disbursement (up to 3 years), nonstandard lending terms, and focus on actions to reduce the severity of the crisis. The SPL is used to address crisis situations by providing large-scale lending as part of an international rescue effort, usually including IMF and the World Bank, to help restore stability in one or more of ADBs DMCs. The second dimension that would justify ADB intervention is when the crisis has significant structural dimensions and is likely to have significant negative social impacts. Because of the unanticipated nature of a crisis, SPLs are not planned in advance. Extraordinary crisis situations, principally as a feature of globalized capital markets, can reoccur and be unexpected. Large reversals of capital flows and marked unexpected swings in relative prices require very sizable resources to restore stability. A protracted recovery phase is likely to ensue after stability has been restored, during which the structural weaknesses that precipitated the crisis can be addressed. An SPL can lead to subsequent planned standard programs during the recovery phase. Advisory TA may also be attached to SPLs to study major policy issues and to strengthen key sector institutions. The SPL, possibly with attached advisory TAs to help formulate a well thought out policy matrix for a subsequent standard program loan, would have been a more appropriate lending modality to support Thailand during the Asian financial crises. However, ADB did not have that lending modality at the time. 93. Political changes can take place during the implementation of a program loan, as what took place in Thailand. The challenge is to develop programs and policy objectives that are robust enough to withstand changes in government leadership. This may require some flexibility

24 on the part of ADB as a new government adopts different policies and instruments that are designed to achieve objectives that are broadly consistent with the strategic objectives of the program. 94. Formulating social sector reforms requires knowledge of the legislative system and political economy of the DMC. Adequate sector analysis, extensive needs assessment, broad consultation, and a well-defined monitoring and evaluation system are requirements for the program loans to be successfully implemented and to have a positive impact. The design, scheduling, and dissemination of TA contents must be integrated with the expected outputs and impact of the overall program. The length of record maintenance should be agreed upon by the Government and ADB to allow continued monitoring and post-evaluation purposes of program loans. 95. Clear partnerships or links between national and local institutions are important in planning the decentralization process. Building capacity at the local or institutional level, and transferring the functional responsibilities and the associated budgetary resources from the central Government, are prerequisites for ensuring success of decentralization, particularly in the social sectors. The continuing role of central Government, or lack of it, needs to be defined clearly and understood. Building capacity at the local level is often a time consuming, resource intensive exercise. This needs to be taken into account when planning decentralization programs. 96. ADB is moving progressively towards the adoption of a results-based management. To provide an objective assessment of impact and achievements, the design of a program loan must incorporate (i) specific targets, (ii) clear measures of achievement during and after implementation, and (iii) systematic monitoring and evaluation system with specific time frames. Without these, it is difficult to evaluate the precise contributions of the program to reforms, the impact of the program on key indicators, and the extent of capacity building that took place. Targets and indicators should be established at the design stage of a program and conveyed to the government agencies implementing the program. Developing such targets and standards would enhance the Governments monitoring ability and reporting to ADB, allow for midterm corrections, and contribute to the successful achievement and sustainability of the program goals. 97. Further work is needed to (i) strengthen the social security system to include coverage for workers in the informal sector who belong to vulnerable groups; (ii) improve the quality of education, and deploy more teachers in the rural areas; (iii) improve the health financing system; (iv) support science, technology, research, and innovation; and (v) enhance private sector participation in the social sectors. C. Recommendations and Follow-Up Actions

98. In addition to the lessons learned presented in the previous section (paras. 9296), this PPAR supports two of the PCRs recommendations, which still need attention. One concerns future monitoring. NESDB and MOF (the SSPs Executing Agency) need to continue to monitor aspects of the reform process that were still works in progress at the time of OEM. The autonomy of universities, full implementation of NEA, corporatization of hospitals, and the labor policy action plan still require monitoring and support. 99. ADBs recently opened Thailand Resident Mission might consider highlighting the lessons learned from this Program and share the knowledge with the Government.

Appendix 1

25

SOCIAL SECTOR PROGRAM FRAMEWORK Address the social impacts of the crisis and the underlying social sector causes

GOAL

PURPOSE

Mitigate the shortterm social impacts of the financial crisis

Enhance competitiveness through human resource development

Reduce inefficiencies in the provision of social services

Support laid-off workers:

Centers to assist laid-

Improve competitiveness of labor market

Rationalize minimum

Pro-poor resource allocation

Line ministries with

off workers Extension of social security benefits

wage Implement an action plan to improve competitiveness of labor force

poverty programs to allocate according to poverty incidence

Employment for vulnerable workers

Funding for targeted

programs to provide employment to vulnerable workers and unemployed

Promote private sector investment in training

Simplify procedures for

Rationalize allocation of social services staff

Reduce ministry staff Control hiring of primary

training tax incentives

Allow private firms to

school teachers
Redeploy health and

contribute to the planned Skill Development Fund

education personnel to the rural areas

Prevention of dropouts
Student loan schemes Student scholarship

OUTPUT

programs
School milk and lunch

Improve quality of priority education programs

Maintain budgets for

Decentralization of social services provision

Legislation to improve

INPUT

programs Protection of education budgets in provinces

science, mathematics, and foreign language courses Establish independent school inspection body

Health care for the poor

Increased funding for

contractual conditions for school teachers Grant autonomy to vocational schools and universities Capacity building for hospital autonomy

the public assistance schemes Extension of voluntary health card scheme

Promoting private sector education

Allow private education

Protection of priority health budgets

Maintain program

coverage for maternal and child health, and HIV/AIDS activities

institutes to access public sector education financing Government to create a level playing field for, and avoid crowding out of, private education institutes

26

Appendix 2

SUMMARY OF SOCIAL SECTOR PROGRAM ACTIVITIES AND ACTUAL PROJECT COSTS

Project Costa (B million) Actual Cost (B million)

Project First Tranche 1. Scholarship Fund to Assist Students Affected by the Crisis

Agency

Project Description

Ministry of Education (MOE)

886.20

2. The Voluntary Health Card Project

3. Computer Training Program

Ministry of Public Health (MOPH) Ministry of Labor and Social Welfare (MOLSW)

1,200.00

85.00

4. Project to Study Unemployment and Employment During the Crisis

National Statistical Office (NSO)

10.03

- To provide scholarships 835.37 to 332,436 students and 45,864 novices in primary and lower secondary schools who have problems with remaining in school due to economic crisis or due to low income levels. - To provide voluntary 1,025.00 health cards for 2.4 million additional lowincome earners. - To develop the 205.00 (85 million from computer skills of the Social 10,000 laid-off workers Sector and/or unemployed with Program and upper secondary education, and to create 120 million from national job opportunities for budget) them. - To enhance the competitiveness of Thai workers by developing computer skills (e.g., system design, programming and system analysis), and enlarge the number of personnel in computer and information technology. - To conduct the Labor 9.62 Force Survey in November 1998 and 1999 by the NSO. - The information will be used as guidelines for policymakers to develop a suitable framework for unemployment assistance projects.

5. Community Strengthening through Employment Creation Project

Continued on next page

Appendix 2

27

Project 5.1 Community Strengthening through Employment Creation Project: Training of Rubber Tree Tapping Project

Agency MOLSW

Project Costa (B million) 20.80

5.2 Community Strengthening Through Employment Creation Project: Project to Employ University Graduates to Strengthen Village Welfare Centers

MOLSW

852.00

5.3 Community Strengthening Through Employment Creation Project: Project to Support Home-Based Production Networks Through Management Skills Training for Group Leaders

MOLSW

15.09

5.4 Community Strengthening Through Employment Creation Project: New Theory

Ministry of Agriculture and Cooperatives

777.00

Project Description - To provide rubber tree tapping training for 10,000 retrenched workers who returned home in 19 northeastern provinces. - The trained workers are expected to work in the south and the east to replace repatriated alien workers. - To employ 12,794 bachelor degree graduates and 75 people with financial experience to work in 68,862 village welfare centers in all 76 provinces. - The employed graduates and retrenched workers will collect basic information about the unemployment, social welfare, and public welfare of the people in the responsible areas of each public welfare center. - To train 200 officials and assistants nationwide to become trainers for management skill development. - To develop management skills of 7,500 leaders of homebased production groups in 30 provinces. - To develop a database network on home-based production at nine centers to serve as an information base for home-based production groups, manufacturers, and authorities. - To help 4,850 farmers families develop New Theory Agriculture, with the farms under the project becoming demonstration farms of

Actual Cost (B million) 8.45

847.49

12.81

Data not available

Continued on next page

28

Appendix 2

Project Agricultural Projectb (including integrated farming)

Agency

Project Costa (B million)

6. Project to Support Disadvantaged PreSchool Children in Urban Areas 7. Project to Provide Lunch and Milk to Disadvantaged Children in Child Development Centers

Ministry of Interior

7.30

Ministry of Interior

27.48

8. Project to Develop a Community Unemployment Register

Ministry of Interior

5.63

Project Description the New Theory Agriculture. - To employ 750 bachelor degree graduates to help farmers prepare farm accounts. - To develop 17 child care centers that will recruit 50 children and 3 staff each. - To provide lunch and milk for 200 days to 13,743 children, 36 years old, in 7,119 child development centers nationwide. - To reduce malnutrition problems among poor children in rural areas. - To survey the unemployment in 68,839 villages nationwide to develop an improved database of unemployment and labor markets. - 1,100 officials and 68,839 kamnans (subdistrict chiefs) and village chiefs trained to conduct the survey.

Actual Cost (B million)

1.19

24.44

8.71

Second Tranche 1. Scholarship Fund to Assist Students Affected by the Crisis, Educational Year 1999 2. Project to Employ Capable Retrenched or Unemployed Workers to Work for Public Universities MOE 520.00 - To provide scholarships to 140,000 students and novices in primary and lower secondary schools. - To employ 750 retrenched or unemployed workers with masters or doctoral degrees to be lecturers, researchers, or teachers assistants in public universities. Data not available

Ministry of University Affairs

76.15

Data not available

Continued on next page

Appendix 2

29

Project Agency 3. Project to Provide MOPH/ Assistance to MOLSW Reduce Mental Impact of Unemployed Workers 4. Project to Monitor National and Evaluate Social Economic and Sector Program Social LoanFirst Tranche Development Board

Project Costa (B million) 31.45

Project Description - To reduce the mental impact of the unemployed and people affected by the economic crisis. - To hire the consultant to systematically monitor and evaluate the projects under the first tranche of the Social Sector Program loan. - To hire 10,543 unemployed graduates and retrenched workers to work in village welfare centers in 2000. - To contribute to the educational loan fund, which grants loans to students in private vocational schools who have problems with remaining in school in 1999.

Actual Cost (B million) Data not available

4.00

Data not available

5. Project to Employ University Graduates to Strengthen Village Welfare Centers 2000 6. Project to Assist Students in Private Vocational Schools

MOLSW

712.28

Data not available

MOE

100.00

Data not available

a b

To be financed by the Government. This project introduced scientific technologies in agricultural practices. Sources: ADB. 2002. Project Completion Report on the Social Sector Program (Loan 1611-THA) in Thailand. Manila; and National Institute of Development Administration Evaluation Report, National Economic and Social Development Board, Thailand, 2000.

30

Appendix 3

STATUS OF COMPLIANCE WITH POLICY CONDITIONS

Reference in Loan Agreementa Status of Compliance (PCR) Status of Compliance and Comments (PPAR)

Covenant
A. 1. First Tranche Conditions Labor Market and Social Welfare Establish a center for assisting laid-off workers.

Implemented.

Implemented during SSP. The national center subsequently was closed, and the provincial CALOWs functions were integrated with the provincial employment centers. Implemented during SSP. Social security was subsequently broadened to cover people beyond the labor force along with reducing the requirement for companies to join the system from at least 10 workers to 1. Implemented during SSP. In addition to poverty funding for the provinces, the new Government is providing village funds directly to the villages and additional supplementary scholarships for the poor. Implemented during SSP. However, the Skill Development Fund will not take effect until January 2005.

Extend social security coverage for laid-off workers.

Implemented.

Bureau of Budget to issue budget preparation instructions to line ministries to disaggregate provincial budget requirements for poverty programs on the basis of poverty incidence.

Implemented.

Government to simplify procedures for private enterprises to obtain tax deductions for training of employees in accordance with the Vocational Training Promotion Act (VTPA). Limit minimum wage increase in 1998 in accordance with the Governments intention expressed in November 1997.

Implemented.

Implemented.

Implemented during SSP. Since 1998, maximum and minimum ranges of minimum wage (varies by province) have increased 4.3% and 2.3%, respectively, as of 2004.

2.

Education Increase budget for student loans. Implemented. Implemented. Student loan budget continued to grow each year until 2003. The Government will establish a new loan scheme in 2006 called the Income Contingent Loan. Continued on next page

Appendix 3

31

Covenant
Establish a mechanism to monitor expenditures for science, mathematics, and foreign languages (including those for teacher training). Maintain teacher training and instructional materials recurrent budgets for science, mathematics, and foreign languages programs at FY1997 levels. Strictly control hiring of new primary teachers beginning FY1998 as a first step to increase the student/teacher ratio at the primary level to 25:1 by FY2002. Government will confirm the plan to delegate to all higher education institutions authority and responsibility to manage the entire non-salary recurrent budget by FY2000. Delegation of authority to all higher education institutions to reallocate 5% of their budget between different budget items. Government will maintain the budget share of primary and secondary schools outside Bangkok Metropolitan Region at FY1997 level. Amend regulations of Human Resources Development Fund.

Reference in Loan Agreementa

Status of Compliance (PCR)

Implemented.

Status of Compliance and Comments (PPAR)

Implemented during SSP.

Implemented.

Implemented during SSP. Budgets for science, math, and foreign languages have fluctuated since SSP. The teacher training budget increased by 126% in 2003. Implemented hiring control during SSP. However, student/teacher ratio at primary level did not achieve the target of 25:1 by FY2002. It was 21:1. Implemented during SSP. Universities now receive block research grants based on the number of instructors, and they can control administration of finance for new personnel. Implemented during SSP. Higher education institutions now control close to 10% of their finances. Unable to obtain budget figures.

Implemented.

Implemented.

Implemented.

Implemented.

Implemented.

Implemented during SSP. Simplified procedures for private firms to receive tax deductions for training of employees. However, Skill Development Fund will not start until January 2005.

3.

Health Increase budget for health programs for the poor. Implemented. Implemented during SSP. The Voluntary Health Card Scheme and the Public Assistance Scheme expanded until 2000, before being replaced with the B30 scheme in 2001.

Continued on next page

32

Appendix 3

Covenant
Protect program coverage for maternal and child health and HIV/AIDS activities at FY1997 levels.

Reference in Loan Agreementa

Status of Compliance (PCR)

Implemented.

Status of Compliance and Comments (PPAR)

Not implemented for HIV/AIDS. Government expenditures on HIV/AIDS from FY1998 until FY2004 were below FY1997. However, HIV/AIDS prevention activities as a percentage of the budget were essentially the same in FY1999 as FY1997. (Unsure about maternal and child health budgets.)

B.

Second Tranche Conditions Line ministries with poverty programs to allocate budget to the provinces for poverty programs based on poverty incidence in the provinces, starting from FY1999. Cabinet approval of draft amendment to VTPA to enable private enterprises to contribute to the Skills Development Fund. The amendment will provide for the phased introduction, to be completed by FY2003, of a training levy on private enterprises, accompanied by a training voucher scheme. Cabinet approval of action plan to improve competitiveness of labor force based on the labor and wage policy review. Cabinet approval of draft legislation to establish an independent school inspection body outside the education administration system to move to output- or performance-based management as opposed to input-based control. At upper secondary level, increase general education budget share and reduce vocational education budget share by at least 5% in FY1999. Schedule 3, para. 2 Implemented. Implemented. The new Government subsequently revamped the approach to poverty programming by implementing village funds and a registry for the poor. Partly implemented. Though the amendment was made on time, the Skill Development Fund will not take effect until January 2005.

Schedule 3, para. 3

Implemented.

Schedule 3, para. 4

Implemented.

Implemented during SSP. However, implementation of the action plan for labor was subsequently abandoned. Implemented during SSP. The Office for National Education Standards and Quality Assessment, established in 2000, has started evaluating some primary schools. All primary schools will be evaluated by August 2006. Not fully implemented during SSP. The Government was not able to reach the target level because previous budgets had already allocated significant resources to vocational education, particularly capital costs, and students had already been enrolled. Continued on next page

Schedule 3, para. 5

Implemented.

Schedule 3, para. 6

Substantially Implemented. The Government was able to increase the budget share for general education relative to vocational education by 3.6% in FY1999, despite overall budgetary constraints. At this stage, the numerical target is no longer of

Appendix 3

33

Covenant

Reference in Loan Agreementa

Status of Compliance (PCR)

critical importance as the Government has taken steps to increase private sector involvement in the provision of vocational training, while focusing on efforts to achieve universal access to secondary education in Thailand as mandated by the 1997 Constitution.

Status of Compliance and Comments (PPAR)

Cabinet approval of draft legislation establishing by FY2001: (i) a personnel administration and salary system for public primary and secondary teachers outside the central civil service framework; and (ii) a scheme to reduce administrative staff in the Ministry of Education by at least 25% through rationalization of positions and redeployment to local governments.

Schedule 3, para. 7 (i)

Implemented.

Schedule 3, para. 7 (ii)

Implemented.

Draft legislation implemented during SSP, but the laws related to teachers are still awaiting passage by Parliament. Draft legislation was implemented during SSP. The plan was approved, but subsequently abandoned; little progress has been achieved in reducing the administrative staff and redeployment. Implemented during SSP. Universities are managing non-salary budgets. Completed the first round of university evaluations in 2003. Draft legislation was implemented during SSP. Minimal progress has been made in decentralizing education to local education authorities. Although 175 Local Education Areas were defined, schools are still controlled by the central ministry. Partially implemented. Vocational schools have control over their curriculum, but do not control personnel (salaries) and financial management. Implemented during SSP. One university gained autonomy. Timetable for university autonomy was Continued on next page

Universities will be granted the authority to manage the entire non-salary current budget from FY1999. Establishment of performance-based monitoring system for universities. Cabinet approval of draft legislation to delegate, in a phased manner, selected academic, financial, and personnel management functions in primary and secondary education to provinces, municipalities, and local communities (tambons), to be completed by 2005. Delegation of authority to vocational schools and skills development institutes for program and/or curriculum development, cost recovery mechanisms, and personnel and financial management. Confirm commitment to make all public universities autonomous by 2002. By December 1998, at

Schedule 3, para. 8

Implemented.

Schedule 3, para. 9

Implemented.

Schedule 3, para. 10

Implemented.

Schedule 3, para. 11

Implemented.

34

Appendix 3

Covenant
least one university will have been given full autonomy.

Reference in Loan Agreementa

Status of Compliance (PCR)

Status of Compliance and Comments (PPAR)

prepared and later abandoned. However, some public universities are now willing to become autonomous.

Cabinet adoption of an official policy on the role of government at all levels of education, specifically to avoid crowding out of private schools and/or institutions. In addition, the Government will eliminate inequities in the regulatory framework for private education as compared to public education, and will allow schools to establish their own fee structures.

Schedule 3, para. 12

Implemented.

Implemented during SSP. Private schools receive per capita financing from the Government and determine their fee structures.

In FY1999, the Government will allocate sufficient budget to cover: (i) the existing recipients under the Public Assistance Scheme (25.7 million) and additional recipients as a result of the economic crisis (an estimated 3 million); and (ii) 2 million cardholders (covering 9 million people) under the Voluntary Health Card Scheme. Protect FY1999 budgets for maternal and child health and HIV/AIDS activities at FY1997 levels.

Schedule 3, para. 13 (i)

Implemented.

Implemented during SSP. The target was achieved.

Schedule 3, para. 13 (ii) Schedule 5, para. 13

Implemented.

Implemented during SSP. The additional card holder target was met. Not implemented for HIV/AIDS. Government expenditures on HIV/AIDS from FY1998 until FY2004 were below FY1997. However, HIV/AIDS prevention activities as a percentage of the budget were essentially the same in FY1999 as FY1997. Implemented during SSP. Redeployment began during SSP, but the action plan was not implemented. The number of doctors per 100,000 people outside of Bangkok has increased only marginally between 1998 and 2003 (less than 8% growth in physicians per 100,000), while dentists per 100,000 people grew 32%.

Implemented.

Start redeploying health staff to rural areas.

Schedule 3, para. 14

Implemented.

Continued on next page

Appendix 3

35

Covenant
Start the process of restructuring as a corporation at least one public hospital in a rural area on a pilot basis, and delegate to it full authority and responsibility for administration and finance, including personnel management.

Reference in Loan Agreementa

Schedule 3, para. 15

Status of Compliance (PCR)

Implemented.

Status of Compliance and Comments (PPAR)

Implemented during SSP. Ban Phraeo Hospital became fully autonomous in 2000.

CALOW = Center for Assistance to Laid-Off Workers, FY = fiscal year, HIV/AIDS = human immunodeficiency virus/acquired immunodeficiency disease syndrome, PCR = project completion report, PPAR = program performance audit report, SSP = Social Sector Program. a The first tranche has no references in loan documents because conditions were taken from the policy matrix, which was attached to the Governments Development Policy Letter of 2 February 1998. Source: PCR, Operations Evaluation Mission discussions with Government, as well as records from government offices.

36

Appendix 4

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Reference in Loan Agreement
Article V, Section 4.01 (a) Article V, Section 4.01 (b)

Covenant
The Borrower shall cause the Program to be carried out with due diligence and efficiency and in conformity with sound administrative and financial practices. In carrying out the Program, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 of this Loan Agreement. The Borrower shall make available, promptly as needed, the funds, facilities, services, and other resources which are required, in addition to the proceeds of the loan, for the carrying out of the Program. The Borrower shall ensure that the activities of its departments and agencies in carrying out the Program are conducted and coordinated in accordance with sound administrative policies and procedures. Except as the Asian Development Bank (ADB) may otherwise agree, the Borrower shall maintain, or cause to be maintained, records and documents adequate to identify the eligible items financed out of the proceeds of the loan, and to indicate the progress of the Program. The Borrower shall enable ADBs representatives to inspect any relevant records and documents referred to in paragraph (a) of this section. The Borrower shall furnish, or cause to be furnished, to ADB all such reports and information as ADB shall reasonably request concerning (i) the loan, and the expenditure of the proceeds and maintenance of the service thereof; (ii) the goods financed out of the proceeds of the loan; (iii) the counterpart funds, and the use thereof; (iv) the implementation of the Program, including the accomplishment of the targets and carrying out of the actions set out in the policy letter; (v) financial and economic conditions in the territory of the Borrower and the international balance-ofpayments position of the Borrower; and (vi) any other matters relating to the purposes of the loan.

Status of Compliance (PCR)

Complied with.

Status of Compliance (PPAR)

Complied with.

Complied with.

Partly complied with. Government budget for HIV/AIDS prevention and care in FY1999 was below FY1997 level. Complied with.

Article V, Section 4.02

Complied with.

Article V, Section 4.03

Complied with.

Partly complied with. Monitoring and reporting certain aspects of the Program within ministries had gaps, particularly in tracking beneficiaries. No records were available after Program ended and was completed.

Article V, Section 4.04 (a)

Complied with.

Article V, Section 4.04 (b) Article V, Section 4.05 (a)

Complied with.

Complied with.

Complied with.

No reports were on file.

Continued on next page

Appendix 4

37

Covenant
Without limiting the generality of the foregoing, the Borrower shall cause the Fiscal Policy Office, with the assistance of the National Economic and Social Development Board, to furnish to ADB annual reports on carrying out the Program, and on the accomplishments of the targets and carrying out the actions set out in the policy letter. Such reports shall be submitted at the end of each fiscal year during the implementation of the Program, from the end of FY1998 onward, and shall be in such form and in such detail as ADB shall reasonably request. The reports shall indicate, among other things, progress made and problems encountered during the period under review, steps taken or proposed to be taken to remedy these problems, and the proposed program of activities and expected progress during the following review period. Promptly after the completion of the Program, but in any event not later than 3 months thereafter or such later date as may be agreed for this purpose between the Borrower and ADB, the Borrower shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution of the Program, including its cost, the performance by the Borrower of its obligations under this Loan Agreement, and the accomplishment of the purposes of the loan. It is the mutual intention of the Borrower and ADB that no other external debt owed a creditor other than ADB shall have any priority over the loan by way of a lien on the assets of the Borrower. To that end, the Borrower undertakes that (i) except as ADB may otherwise agree, if any lien shall be created on any assets of the Borrower as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the loan; and (ii) the Borrower, in creating or permitting the creation of any such lien, will make express provision to that effect. The provisions of paragraph (a) of this section shall not apply to (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such

Reference in Loan Agreement

Article IV, Section 4.05 (b)

Status of Compliance (PCR)

Partly complied with.

Status of Compliance (PPAR)

Low level of compliance. Only one annual report was submitted to ADB, and it covered 1998 and 1999. Internal annual reports by the Government were prepared in Thai, but not translated into English.

Article IV, Section 4.05 (c)

Complied with late.

Complied with late. ADB did not receive the draft Project Completion Report from the EA until the November 2002 ADB mission.

Article IV, Section 4.06 (a)

Complied with.

Complied with.

Article IV, Section 4.06 (b)

Complied with.

Complied with.

Continued on next page

38

Appendix 4

Covenant
property; or (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than 1 year after its date. The term assets of the Borrower as used in paragraph (a) of this section includes assets of any political subdivision or any agency of the Borrower and assets of any agency of any such political subdivision, including the Bank of Thailand and any other institution performing the functions of a central bank of the Borrower.

Reference in Loan Agreement

Status of Compliance (PCR)

Status of Compliance (PPAR)

Article IV, Section 4.06 (c)

Complied with.

Complied with.

EA = executing agency, PCR = project completion report, PPAR = program performance audit report. Source: PCR, Operations Evaluation Mission discussions with Government, and program records.

Appendix 5

39

PERFORMANCE OF RELATED TECHNICAL ASSISTANCE A. Capacity Building for Social Sector Reform (TA 2995-THA)

1. The technical assistance (TA) on capacity building for social sector reform, worth $700,000, had three specific objectives: (i) strengthening the planning and management capacity of the Government, particularly in assisting the National Economic and Social Development Board (NESDB) in improving strategic planning, policy analysis and evaluation, and project analysis and evaluation; (ii) enhancing the ability of the Government to monitor and track the social sector implications of the crisis by enabling NESDB to evaluate the impact of the crisis on social welfare, employment, education, and health; and (iii) assisting the Government in developing the capacity to improve information flows in the labor market through an earlywarning system for shifts in employment. 2. The TA was relevant considering the need to (i) reassess the assumptions and targets under the Eighth National Economic and Social Development Plan, and the forthcoming preparations for the Ninth Plan; (ii) strengthen the agencys capacity to monitor the impact of the crisis; and (iii) improve the flow of information on employment and human resources development. This TA took the lead in coordinating the three TAs, and performed a critical service by disseminating information through quarterly reports and the well-designed, comprehensive Social Sector Program (SSP) loan Web site. 3. The TA was less efficacious. NESDB acknowledged the contributions the TA made in formulating the social sections of the Governments Ninth Plan. The TAs early warning system for the labor market was used every quarter, and subsequently was applied more broadly to NESDBs new social watch cluster as a type of warning system for the social sector. Part of NESDBs restructuring after the crisis was based on the TA. However, only a few higher level NESDB officials in the social sector were involved in the TAs development and implementation. The handbook prepared under the TA, which was used as a starting point for upgrading NESDBs capacity, was not disseminated widely. 4. The key findings and recommendations contained in the TA report were consistent with the key labor and welfare sector issues addressed by the SSP. These included (i) targeting vulnerable groups, (ii) improving the information system on labor, (iii) rationalizing and making services more efficient, and (iv) highlighting main areas for reform. Some of the main findings and recommendations of the TA were acted upon by the Executing Agency. For instance, NESDB embraced the recommendation for improved targeting of disadvantaged households and individuals (by means of focusing on groups demonstrated to be disadvantaged), and strengthened the countrys data systems (in terms of providing timely information) by greater sharing of data across agencies. 5. The TA is rated as efficient. The TA utilized nearly $688,000 of the approved amount of approximately $692,000,1 and it was completed within 1 month of the original closing date. It embodied effective management and implementation processes in its coordination and utilization by other agencies. Impact was achieved during the crisis as NESDB reassessed the

ADB budgeted up to $700,000 for each TA, but because of the competitive bidding process, all three of them utilized less than full amount. Also, the approved amount for the winning proposals did not mean that the full amount was disbursed. The consultants had to bill their person-days along with actual out-of-pocket expenses, and in all three cases the totals were less than the approved amount.

40

Appendix 5

remaining 2 years of the Eighth National Plans social sections, and adjusted its approach to formulating the Ninth Plan. 6. However, the TAs sustainability is less likely. NESDB has built upon the TAs achievements by (i) continuously improving its ability to monitor the social sector, (ii) providing increasingly sophisticated tools and measures for the social sector, and (iii) incorporating lessons learned from the crisis in its planning. However, the Government never implemented the labor action plan prepared under the TA, a key shortcoming. The change in Government resulted in the non-implementation of SSP plans as opposed to shortcomings in the design of the action plan itself. A second shortcoming concerned the absence of an econometrician within NESDB who could recalibrate the early warning system for unemployment. While the knowledge and technology were available, the staff resource to implement it was not. Thus, the TAs contribution to institutional development is rated moderate. Overall, the TA is rated partly successful. B. Education Management and Financing Study (TA 2996-THA)

7. The education management and financing TA, worth $700,000, focused on costs, financing, and management issues as the crisis was expected to affect significantly the financial resources available to public and private schools. Quality improvements were necessary to enhance Thailands competitiveness, and decentralization would redress inefficiencies. The TA had four main objectives: (i) improve the student loan program; (ii) review public expenditures, and prepare an action plan for resource allocation; (iii) prepare a teaching personnel strategy; and (iv) develop legal instruments and an implementation strategy for management decentralization of education services. 8. The TA was relevant as it addressed timely needs and fundamental reforms in financing, quality, and decentralization of education; and it received inputs from the United Nations and bilateral agencies during implementation. The Office of the National Education Commission (ONEC) was the Executing Agency, primarily for its policymaking, development planning, and standard setting roles for education. The four components of the TA corresponded to priority areas of the Ministry of Education (MOE), and sought to provide practical outputs for undertaking necessary reforms. 9. Six main reports came out of this TA: (i) Education Management and Financing in Thailand: Review and Recommendations Summary Report; (ii) Management of Education in Thailand: A Review and Recommendations for an Implementation Strategy for Decentralization; (iii) Teaching Personnel Strategy in Thailand: A Review and Recommendations; (iv) Educational Finance in Thailand: A Review and Recommendations for Improving Allocative Efficiency; (v) The Student Loan Scheme in Thailand: Review and Recommendations for Efficient and Equitable Functioning of the Scheme; and (vi) Technical Assistance Inception Report. The findings and recommendations in the reports were relevant and feasible. 10. The TA was efficacious. This was manifested by the (i) drafting of legal instruments for decentralizing education to local authorities, which were incorporated into the draft education legislation submitted to Parliament during the crisis; (ii) improved targeting for needy students; and (iii) expansion of the student scholarship and loan scheme. The government used the TA reports in implementing education policy reforms. Their utility was enhanced by the translation of all the reports into Thai, making them more accessible to government officials and the public. This TA also had a mainstreaming effect on the reforms in the education sector, an important contribution.

Appendix 5

41

11. ONEC was the executing agency for the TA. However, ONEC at the time was under the Prime Ministers Office and separate from MOE, which deals more with administration than policymaking. The TA might have had a greater impact had MOE been involved directly in the execution, as opposed to being only on the steering committee for the TA. MOEs proactive involvement in executing the TA might have instilled greater sense of ownership, and enhanced the prospects for sustainability. 12. The TA is rated as efficient. The TA had no cost overruns (about $477,000 of the allotted $479,720 was used), and all components were completed 9 months ahead of the scheduled closing date. In addition, no significant mid-course adjustments were necessary. The Government used its outputs on decentralization in the preparation of draft laws on education reforms. The use of the United Nations Educational, Scientific and Cultural Organization (UNESCO, Thailand) as the Implementing Agency of the TA saved money. However, UNESCO and the Thailand Research Institute were selected by default, and their involvement was not intended as a cost-saving measure. 13. Sustainability of this TA appears likely. The Government continues to uphold the priorities of education decentralization, and is committed to maintaining its momentum. The findings and recommendations from the TA reports remain valid. The TA reports are likely to be referred to and utilized as (i) more detailed planning on certain aspects of education reforms becomes necessary, such as a teaching personnel strategy; or (ii) initiatives are implemented, such as handing over authority for education provision to local government bodies. Evidence from the forthcoming student loan scheme supports this assessment. The Government is planning to institute the Income Contingent Loan (ICL) scheme, based on the Australian model, in 2006. In preparing for the ICL scheme, the Government has acknowledged the use of the TA. 14. However, the TAs institutional development impact was minimal. It was confined to ONEC (now called the Office of the Basic Education Council), the TAs Implementing Agency, and only the readers and users of the reports can learn from them. MOE, being the main agency for education, was not directly involved, and new knowledge was not disseminated widely. The overall rating of this TA is successful. C. Health Management and Financing Study (TA 2997-THA)

15. The health management and financing TA, worth $700,000, responded to concerns about disparities in the health system, and the need to ensure effective health financing in the face of higher costs and restrictive budgets. The TAs three main objectives were to (i) reduce urban-rural disparities in access to health services, (ii) improve the health referral system, and (iii) rationalize the health financing schemes. 16. The TA was relevant to the conditions facing Thailands health sector. It addressed major structural factors that had contributed to inequities and inefficiencies. The TAs objectives were consistent with the goals of SSP and the Governments priorities at that time. 17. The implementing team produced seven reports under the TA: (i) Health Management and Financing Final Integrated Report, May 1999; (ii) Health Financing in Thailand Summary Review and Proposed Reforms, May 1999; (iii) Thai Autonomous Hospitals Operation Manual, May 1999; (iv) Human Resources for Health in Thailand Technical Report, May 1999; (v) Health Financing in Thailand Technical Report, April 1999; (vi) Referral System Improvement in Thailand Technical Report, December 1998; and (vii) Technical Assistance Inception Report, July 1998.

42

Appendix 5

18. Although the reports were of good quality and contained useful recommendations, the TA is rated less efficacious because the outputs had minimal impact on the health system. The health action plan was not implemented fully, and the problem of attracting health professionals to rural areas was not resolved. The health referral system reportedly has improved since the financial crisis as people use primary care centers instead of relying solely on hospital outpatient wards. However, this is not due to the health TA. Instead, this improvement is the result of the financing arrangement under the B30 health care policy, which charges medical institutions for making referrals. Ban Phraeo Hospital, the only hospital restructured as a corporation, underwent the autonomy process between 1998 and 2000. However, Ban Phraeo Hospital did not receive direct support from the TA, and its autonomy plan and this TA were implemented with minimal intellectual cross-fertilization. Ban Phraeo Hospital never utilized the handbook on autonomous hospitals prepared under the TA, because it was not practical. 19. The main impact of the TA was opening a discussion about hospital finance, which has been controversial in Thailand since the crisis. The TA helped to clarify that Thailand did not need deregulated, privatized hospitals, but deregulated public hospitals. A second contribution of the TA, which was implemented by SSP, was the provision of valuable experience in per capita financing to the Ministry of Public Health (MOPH). This had an influence on the B30 health care scheme that the new Government in Thailand implemented in 20012002. 20. This TA is rated less efficient, because of the shortcomings in its tangible achievements and the lack of direct application of the reports and recommendations. However, the TA utilized only $453,500 of the allocated $571,861,2 and all components were completed on schedule. 21. Sustainability is rated less likely, because hospital autonomy is no longer on the Governments agenda, the referral system has been addressed in other ways, and redeployment of health staff is not drawing from the TA recommendations. Overall, the B30 health policy diminished the utility of the TA findings and recommendations. However, the reports and recommendations could be utilized if the Government reconsiders some of the issues promoted by SSP, such as hospital autonomy. 22. The TA had little impact on institutional development. Few ministry staff members were involved, and awareness of the TAs findings and recommendations was almost negligible in MOPH. This TA is rated unsuccessful.

ADB. 2002. Project Completion Report on the Social Sector Program Loan (Loan 1611-THA) in Thailand. Manila.

Appendix 6

43

($ $

44

Appendix 7

TABLES AND FIGURES Table A7.1: Employment and Social Security Data
Item Employed people, 3rd quartera (millions) Terminated workersb (annual) Unemployment, 3rd quartera (%) People in social securityc (millions) 1998 31.93 356,367.00 3.40 5.42 1999 31.90 105,499.00 3.00 5.68 2000 32.83 174,174.00 2.40 5.81 2001 33.48 2002 34.26 2003 34.68 212,725.00 1.50

184,802.00 176,793.00 2.30 5.87 1.80

= not available. Sources: a National Statistical Organization. b Bank of Thailand. c Social Security Office.

Table A7.2: Student Loan Budget

Item Secondary students University students Total students Total loans (million baht) 1996 127,781 20,663 148,444 3,652.69 1997 371,138 64,288 435,426 1998 634,917 112,093 747,010 1999 729,662 152,210 881,872 2000 728,105 172,885 900,990 2001 787,182 200,710 987,892 2002 1,003,189 2003 918,966

12,151.19 19,443.02 23,746.28 24,449.63 28,491.61 29,710.48 28,637.18

= not available. Source: Bureau of the Budget.

Table A7.3: Selected Vaccine Coverage Rates (%)

Type of Vaccine Pregnant woman receiving tetanus toxoid immunization Diptheria, pertussis, tetanus 3 immunization Polio 3 immunization
Source: Ministry of Public Health.

1996 93.0 94.3 94.3

1997 82.5 92.5 92.3

1998 85.7 96.9 95.8

1999 80.4 92.1 93.0

2000 74.0 94.4 94.5

2001 92.3 94.3 94.6

2002 74.5 89.3 89.2

Appendix 7

45

Table A7.4. Child and Maternal Mortality Rates

Item Under 5 child mortality rate (per 1,000) Maternal mortality rate (per 100,000) 1997 1.5 1998 2.8 15.8 1999 2.1 14.2 2000 1.8 2001 1.9 17.6a 2002 2.1 24.0 a 2003 2.3

= not available. a The higher rate is attributed to improved data collection and does not indicate an actual increase. Sources: Bureau of Policy and Strategy, Ministry of Public Health, National Economic and Social Development Board, and United Nations Country Team in Thailand. 2004. Thailand Millennium Development Goals Report 2004. Bangkok.

Table A7.5: Enrollments in Vocational Education by Type of Institution

Type of School Public enrollments Private enrollments 2001 592,857 353,330 2002 596,709 351,800 2003 571,288 362,670

Source: National Statistics Office and Office of the Vocational Education Commission.

Table A7.6: Coverage by Physicians, Dentists, and Nurses (per 100,000 people)
Item Physicians BMA Other Provinces Dentists BMA Other Provinces Nurses BMA Other Provinces 1997 1998 1999 2000 2001 2002

138.9 16.0 20.9 3.2 217.7 75.0

131.2 19.0 33.0 3.7 315.5 88.5

131.6 19.1 33.4 3.8 323.6 88.5

126.3 19.4 28.3 4.5 323.6 93.8

130.9 20.1 31.1 4.5 347.2 101.5

105.1 20.2 15.1 4.7 385.4

= not available, BMA = Bangkok Metropolitan Area. Source: Ministry of Public Health.

46

Appendix 7

Figure A7.1: HIV/AIDS Program Finance by Source, 19962003

2500 Million baht 2000 1500 1000 500 0

19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03

External assistance Thai Government

HIV/AIDS = human immunodeficiency virus/acquired immunodeficiency disease syndrome. Source: United Nations Development Programme. Thailands Response to HIV/AIDS: Progress and Challenges.

Figure A7.2: Education Transition and Completion Rates

100 95 90 85 80 75 70 65 60 55 50
19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03

Transition lower secondary Transition upper secondary Completion primary ed. Completion lower secondary Completion upper secondary

Source: Educational Data and Information Center, Research and Education Development Bureau, Organization for Economic Cooperation and Development.

Percentage

Appendix 7

47

Figure A7.3: Yearly New HIV Infections

60,000 Number of people 50,000 40,000 30,000 20,000 10,000 0 1996 1997 1998 1999 2000 2001 2002 2003
HIV/AIDS = human immunodeficiency virus/acquired immunodeficiency disease syndrome. Source: United Nations Development Programme. Thailands Response to HIV/AIDS: Progress and Challenges.

Figure A7.4: Proportion of People Below the National Poverty Line

25 20 Percentage 15 10 5 0 1996 1998 1999 2000 2001 2002

Source: National Economic and Social Development Board and United Nations Country Team in Thailand. 2004. Thailand Millennium Development Goals Report. Bangkok.

Whole Kingdom Urban area Rural area

48

Appendix 8

VOCATIONAL EDUCATION IN THAILAND SINCE THE CRISIS 1. The Social Sector Program contained one policy condition related to vocational education: to increase the upper secondary education budget and reduce the vocational education budget by at least 5% in FY1999. While the target of 5% was not attainedthe actual figure was 3.6%the policy condition had a lasting impact on vocational education budgets from that year onward. 2. Before the economic crisis, the Government emphasized vocational education. The Department of Vocational Education, which was renamed the Office of Vocational Education Commission in 2002, established 1020 new vocational colleges every year. However, the last new vocational colleges were set up in 1997. Thailand has had 412 public vocational colleges since 1997 due to the freeze on new schools.1 The country also has 384 private vocational schools, 100 of which are in Bangkok. 3. The budget decline in vocational education started with the policy condition in the matrix requiring the Government to reduce vocational education spending by 5% in relation to general secondary education for FY1999. It marked the beginning of the Governments shift in emphasis to basic education. From FY1999 to FY2004, the budget for vocational education declined nearly 19%, and its share of the Ministry of Educations budget dropped from 7.8% to 6.0% over that period. Table A8.1: Department of Vocational Education Budgets Compared with National Budget and Ministry of Education Budgets: Fiscal Years 19992004
Item
1. GDP (1) 2. National Budget (2) 3. MOE Budget (3) 4. DOVE Budget (4) 5. (4) as % of (1) 6. (4) as % of (2) 7. (4) as % of (3)

FY1999
4,632,100.00 825,000.00 151,752.10 11,787.20 0.25 1.43 7.77

FY2000
4,904,700.00 860,000.00 159,141.50 10,421.20 0.21 1.21 6.55

FY2001

FY2002

FY2003
999,900.00 158,729.80 9,944.90 0.18 1.0 6.27

FY2004
6,263,700.00 1,028,500.00 158,037.70 9,553.20 0.15 0.93 6.04

5,098,100.00 5,309,200.00 5,588,800.00 910,000.00 1,023,000.00 160,864.20 9,309.40 0.18 1.02 5.79 162,428.00 9,674.50 0.18 0.95 5.96

DOVE = Department of Vocational Education, FY = fiscal year, GDP = gross domestic product, MOE = Ministry of Education. Source: Vocational Education Office, 2004.

4. Another impact is that 70 vocational schools were established in 1997 in rural areas. However, as a result of the crisis and policy conditions from the International Monetary Fund and the Asian Development Bank, the schools could not hire enough full-time teachers. 5. Despite the shrinking budgets, enrollments in public vocational institutions seemed unaffected until 2003. Student enrollment in vocational education grew annually between 1998 and 2002, exception for a slight decline in 2001. However, enrollments dropped by more than 25,000 students in 2003.2

Other public vocational institutions include the Rajamongala Institutes of Technology (55 campuses), which soon will be upgraded to universities, and 15 colleges under the Fine Arts Department. Based on data from the Office of Vocational Education Commission.

Appendix 8

49

6. The Office of the Vocational Education Commission reported that enrollment in private vocational schools now exceeds that in public vocational schools. The total enrollment figures are misleading, however. As of 2003, the number of students enrolled in public schools was 817,100, compared to 878,797 for private schools. These figures include students enrolled in short-courses. For full-time enrollments in secondary and post-secondary programs, public vocational schools (571,288 students) exceed private schools (362,670).3 7. The Government is now re-emphasizing vocational training to meet the demand for qualified labor, and enrollments increased in 2004 from a year earlier. Budgets for vocational education are expected to rise as the Government attempts to address the dearth of skilled technicians and labor with the appropriate training for industry. For FY2005, the budget will surpass B12 billion. The budget increase will be applied to equipment and quality upgrading, rather than fixed capital costs such as new buildings. 8. An expanded role of the private sector in public vocational education, through links with firms, appears likely. Each year, the Office of the Vocational Education Commission conducts follow-up studies. The findings over the past few years reveal frequent requests from private sector firms for tailor-made programs, and greater cooperation between firms and teacher training. Public vocational schools began working closely with industry on occupational standards, incorporating these into the curriculum. A stronger partnership with the private sector, and more opportunities for sharing costs, should be possible once the decentralization of the education sector progresses. 9. The private sector is also active in a new advisory group on vocational education policy and standards, which was formed in 2003 and became active in mid-2004. Approximately half of the advisory groups 35 members are from the private sector. 10. Another development has been the dual vocational training program. This program enables students to receive more practical experience working with companies, while simultaneously continuing their studies. Vocational students spend 34 days a week working with companies and 34 days attending school. Approximately 9,000 companies participate in this program. 11. Public vocational schools are working in clusters to improve their quality and efficiency in the face of declining budgets. Twenty-eight clusters have been established around the country, and typically 1215 vocational colleges in two or three provinces operate as a cluster. One advantage of the cluster approach is that the colleges can coordinate with each other and avoid excessive overlap in their curriculums. The Office of the Vocational Education Commission reported another positive outcome of the cluster approach: schools have increased their capacity for managing their affairs, which has helped prepare them for eventual autonomy. 12. The Office of the Vocational Education Commission has an evaluation and monitoring bureau to deal explicitly with quality issues. Vocational schools are required to conduct a selfevaluation, and at least once every 5 years an inspector general performs an assessment of each school. A competency-based evaluation system began in 2002. Quality issues also are addressed through standards established for each subject in all public schools.

S. Choomnoom. The Cost and Financing of TVET Thailand. PowerPoint presentation.

50

Appendix 9

UNIVERSITY AUTONOMY: KING MONGKUTS UNIVERSITY OF TECHNOLOGY (THONBURI)

1. King Mongkuts University of Technology Thonburi (KMU) is the only public university to leave the civil service system and become autonomous.1 While the transition occurred in 1998, KMUs efforts to achieve autonomy began nearly 20 years earlier. These efforts were internally driven, rather than imposed from outside of the university.2 Budget restrictions that affected the universitys ability to recruit quality new staff provided the initial push for KMU 2 decades ago. Despite the lengthy process, KMUs autonomy is a success story that demonstrates the quality and financing benefits of moving away from the state system. 2. KMUs transition to autonomy in 1998 was not linked directly with the Asian Development Banks Social Sector Program (SSP). The university did not receive any financial assistance from the loan.3 KMUs current President argued that KMUs autonomy transformation would have occurred even without the SSP policy condition that at least one university would become autonomous by 1998. The only connection between KMUs push for autonomy and SSP was that the Program helped to reassure the universitys administrators that what they were doing was correct. The President suggested that autonomy is not difficult to achieve in law. The hardest part is changing peoples mindset inside and outside the university, an aspect of autonomy that SSP never addressed. At a conceptual level, however, SSP helped to facilitate understanding and commitment to university autonomy among senior bureaucrats and politicians. SSP did not include strong incentives to push autonomy forward. 3. In 1998, with the Government in dire financial condition because of the economic crisis, KMU finally achieved autonomy. The financial factor essentially sealed the final approval for autonomy as the Government sought to lighten some of its burden. 4. The transition, however, was not easy. Years before achieving autonomy, KMU had to battle misperceptions that the rationale for leaving the state system was purely higher pay for teachers and staff. The personnel system presented one of the most difficult internal challenges for KMU. Staff members expressed concerns about leaving the security of the civil service system. In response, KMU gave them a choice. The administrators designed a dual personnel management system that allows the university to have civil servants working side-by-side with contract workers. At present, 65% of KMUs staff are direct university employees (i.e., non-civil service). The extensive efforts by university administrators to involve the faculty and staff union in the process of becoming autonomous helped smooth the transition of personnel. 5. The transition to autonomy gave KMU authority in three major areas. First, KMU has a university council (similar to a board of directors) that is responsible for decision-making. Second, a Senate was set up to handle academic matters and faculty and/or staff salaries. Previously, the Ministry of University Affairs decided these issues. Third, KMU controls its entire budget. Like other universities, KMU receives a block grant from the Government. The major
1

Three other public universities in Thailand are autonomous, but these were originally set up as autonomous universities. They did not undergo the transition from the bureaucratic system. The other three are Suranaree University, Walailak University, and Mae Fah Luang University. Krissanapong, Kirtikara. 2004. Transition from a University Under the Bureaucratic System to an Autonomous University: Reflections on Concepts and Experience of King Mongkuts University of Technology Thonburi. Bangkok, Thailand: Office of the Education Council. KMU did receive assistance from the Asian Development Banks higher education project for establishing seven centers of excellence. KMU hosts one of the centers and is involved in two others.

Appendix 9

51

difference is that KMU has a consolidated budget, and is allowed to carry over any remaining budgetary funds into the following academic year. Other public universities must spend all of their annual budgets within that year or forfeit the leftover. As a result, public universities spend unnecessarily to use up the entire budget. KMU, on the other hand, is able to save its leftover budget and plan expenditures more carefully. 6. The benefits of autonomy are readily apparent at KMU. In the 6 years since gaining autonomy, KMU has strengthened its finances significantly. Between 1998 and 2004, KMUs assets grew from B3 million to B1,600 million. KMU recorded an annual financial surplus of approximately B200 million over the past 3 years. The university now earns more revenue on its own (about 60% of the total) than from the Government budget allocation (40%). Tuition and fees account for 60% of KMUs self-generated revenue, while research grants make up the remaining 40%. 7. The financial achievements are even more impressive considering that KMU has had one of the smallest per capita subsidies of all universities. KMU receives 40% less per student from the Government than the leading university, Chulalongkorn.4 8. Quality indicators also have improved since becoming autonomous. Faculty publications tripled over the past 6 years. The number of patents issued per year to KMU faculty rose from zero before autonomy to an average of 1015 now. KMU graduates have above average placement rates, and rank high in terms of starting salaries. 9. The universitys science and technology equipment have been upgraded since gaining autonomy, another positive outcome. KMU is able to use innovative and aggressive ways of obtaining higher technology, because of the universitys additional flexibility to mobilize external support. 10. Autonomy has not led to spiraling salaries at KMU. The average starting salary for faculty in public universities under the bureaucratic system is around B10,000 per month. At the high end of the scale is Suranaree University, one of the three public universities established from the beginning as autonomous. Suranarees average starting salary for faculty is approximately B30,000 per month. KMU offers B16,000 per month for salary plus B6,000 for a housing allowance. KMUs faculty and/or staff benefits are on par with those of civil servants. Hence, KMU has a solid foundation for a stable and sustainable financial situation.

The small per capita subsidy for KMU is not related to autonomy. KMU received the same ratio compared to Chulalongkorn University before autonomy.

52

Appendix 10

BAN PHRAEO HOSPITALS AUTONOMY EXPERIENCE 1. Ban Phraeo Hospital, a 200-bed district hospital in Samut Sakorn Province, is the only public hospital to become autonomous. 2. The idea of hospital autonomy was floated before the 1997 crisis. Recognizing that Ban Phraeo Hospital already had a great deal of success with community involvement, the Ministry of Public Health approached the hospital about the idea of autonomy. While 30 hospitals attended a conference on the subject, only two expressed interest. 3. In 1998, Ban Phraeo Hospital was restructured as a corporation as a first step towards autonomy. The hospital achieved full autonomy 2 years later in October 2000. The Asian Development Banks Social Sector Program (SSP) included in its policy matrix the condition that at least one hospital be restructured as a corporation. However, SSP had very little involvement in Ban Phraeos transition to autonomy. SSP did not provide any financing to support Ban Phraeos transformation. One component of the technical assistance on health that was attached to the Program entailed the preparation of a handbook on hospital autonomy. However, the consultants carried out this component with few exchanges of ideas and experiences with the one hospital that was undergoing the autonomy process. 4. The autonomy status confers the hospital with new authority that other public hospitals lack. Among these are (i) (ii) Ban Phraeo is free to recruit staff and make personnel decisions. The hospital has higher accountability to the local community, because of the community involvement on the board of directors and other aspects of the hospitals operations. The hospital is entitled to devise its own organizational structure. The board of directors oversees the hospitals operations instead of the Ministry of Public Health and the Ministry of Finance. The board of directors and hospital administrators set their own policies on budgeting and procurement. The board of directors selects the hospitals chief executive.

(iii) (iv) (v) (vi)

5. One of the more sensitive aspects of the hospitals transformation entailed changing the status of the staff. At the time, all staff were under the civil service system, and received the pay and benefits of government employees. Once Ban Phraeo became a legal entity, staff were asked to take an early retirement from the civil service in preparation for being rehired by the hospital at a 50% higher salary. 6. Many staff members were reluctant to retire from the civil service, fearful of the uncertainty that came with being a direct hospital employee. Since such a transformation had never occurred, staff hesitated to leave the security of the civil service system. Recognizing these concerns, Ban Phraeo Hospital offered staff three options: (i) along the lines of the original plan, staff could retire from the bureaucracy and become direct employees of the hospital (approximately 15% chose this option); (ii) staff could transfer to another hospital and remain part of the civil service (another 15% selected this option); and (iii) staff could use a trial period of 4 years to decide if they wanted to become direct hospital employees or revert back to the civil service.1
1

According to the hospitals director, the 4-year trial period was unnecessarily long. A 1-year trial period would have sufficed.

Appendix 10

53

7. The trial period closed in December 2004, although by that time most employees had decided whether to stay in the civil service or work for the hospital. Half of the employees who entered the trial period decided to stay with the hospital and receive new employee status, while the other half opted to remain in the civil service at another hospital. Although Ban Phraeo ended up losing 50% of its staff (15% under the second option and 35% under the third option), the hospital found it easy to hire new staff. Ban Phraeo now has 260 employees, about the same as before the hospital gained autonomy. It has 23 doctors, 15 of whom are general practitioners and 8 specialists. 8. One of the positive outcomes of this process is the stability of the hospital staff, including the doctors. The quality of services at Ban Phraeo also has improved since becoming autonomous, because doctors are not permitted to operate their own private clinics. Quality is a particularly important issue. If the Ban Phraeo fails to maintain high quality services, the hospital will lose its market share of insured patients (i.e., private health coverage plans and the Social Security system). 9. The nationwide B30 health system clearly is linked to Ban Phraeos experiences with per capita financing and co-payment. In October 2000, the hospital initiated a financing scheme approved by cabinet and based on the number of people in Ban Phraeo District. The original per capita financing scheme budgeted B782 per person with co-payments ranging from B20100 per episode. Primary health centers at the subdistrict level charged B20 per episode, while the district hospital required B40 co-payment for outpatient services and B100 for in-patient services. After 6 months of this initial scheme, Ban Phraeo Hospital switched to the B30 scheme. Under the Prime Ministers B30 system, the hospital received B1,102 per capita for people registered in its jurisdiction, and Ban Phraeo registered a B100 million deficit in the first year. For 2004, the hospital received B1,308 per capita. 10. Since the introduction of the B30 scheme, Ban Phraeos patient level has not changed.

11. Despite the early challenges, Ban Phraeo Hospitals financing system is now healthy, and the hospital is more efficient. Before autonomy, the hospital had difficulty providing efficient services, because of the lengthy bureaucratic procedures and limited budget. Autonomy enabled Ban Phraeo to reduce the administrative hierarchy and focus more on providing health care services instead of bureaucratic procedures. The hospital earns 510% profit each year. As a nonprofit organization, it can reinvest the profit back into the hospital. The hospital director explained that the amount of financing under the B30 scheme is about the same as the previous B2040100 system. The B30 system, Social Security, and the civil servant health care scheme account for 40% of the hospitals revenue. The remaining 60% comes from other sources, such as co-payments, the traffic accident scheme, and workmens compensation. 12. Another important success factor is the community involvement in Ban Phraeo. Community representatives sit on the hospitals board of directors, and local residents join the hospital volunteer programs. In addition, the community contributes financing in the form of donations. For example, some of the rooms in in-patient wards have a plaque outside the door with the name of a donor or sponsor. 13. The success of Ban Phraeo Hospital has attracted attention from other countries, such as Japan and Sri Lanka, which are interested in the hospitals lessons and experiences with autonomy.

54

Appendix 11

ESTIMATED COST OF REFORMS UNDER SOCIAL SECTOR PROGRAM The estimated costs of the reforms supported by the Social Sector Program are shown in Table A11. The Program did not include any cost recovery elements. The costs and benefits of rationalizing and redeploying education and health personnel to the rural areas are not included, because neither has been carried out. Given the absence of data on the cost of the extended social security coverage, the estimated value reflects the minimum cost incurred by the Government. Table A11: Estimated Cost of Reforms
Item Financial sector 11 projects Extended social security coverage from 6 to 12 months for laid-off workers Expansion of the student loan program Amount (million baht) 8,800 3,886 unknown Notes Allocated under Tranche 1 Allocated under Tranche 1 Unable to estimate due to a lack of information on laid-off workers and payouts by Social Security Consists only of the annual incremental budget increases between 1997 and 2001, not total annual budgets for the loan program Consists of incremental allocation to PAS in 1998 (B2,129 million) and subsidy of B500 for 2 million new VHCs in FY1999 Contained in Tranche 1 condition on maintaining program coverage for maternal and child health and HIV/AIDS activities Contained in Tranche 1 condition on maintaining program coverage for maternal and child health and HIV/AIDS activities Equivalent to approximately $758.99 million based on average annual exchange rate for 19982000

16,337

Public Assistance Scheme (PAS) and Voluntary Health Card (VHC) Additional budget for vaccines

1,000

80

Additional budget for HIV/AIDS

105

Total

30,208

FY = fiscal year, HIV/AIDS = human immunodeficiency virus/acquired immunodeficiency disease syndrome.

SOCIOECONOMIC INDICATORS

Table A12.1: Poverty Indicators, 19902002

Poverty indicators National poverty line (month/person/baht) Poverty incidence (%) Number of Poor (millions)
Source: Millennium Development Goal.

1990 522.0 27.2 15.3

1992 600.0 23.2 13.5

1994 636.0 16.3 9.7

1996 737.0 11.4 6.8

1998 878.0 13.0 7.9

2000 882.0 14.2 8.9

2002 922.0 9.8 6.2

Table A12.2: Proportion of Population with Incomes Below the National Poverty Line (%)
National Urban area Rural area 1996 11.4 5.1 14.9 1998 13.0 3.4 17.3 1999 15.9 3.8 21.5 2000 14.2 3.8 19.1 2001 13.0 5.5 16.6 2002 9.8 4.0 12.6

Source: Millennium Development Goal.

Appendix 12

55

56

Table A12.3: Employed Persons by Level of Education in Thailand: 20012004 (000)

2001 Quarter 3 Level of Education Attainment Total None Less than Elementary Elementary Lower Secondary Upper Secondary - General Type - Vocational Type - Educational Type Higher Level - General Type - Vocational Type - Educational Type Others Unknown (JulSep) 33,483.7 1,146.0 13,527.5 7,536.7 4,251.2 3,159.2 2,067.3 1,070.0 21.9 3,773.1 1,814.1 1,170.1 788.8 13.7 76.4 2002 Quarter 3 (JulSep) 34,262.4 1,151.0 13,489.8 7,825.4 4,436.9 3,437.2 2,341.5 1,078.9 16.8 3,826.5 1,866.0 1,224.8 735.7 21.8 73.8 2003 Quarter 3 (JulSep) 34,676.4 1,203.8 12,959.7 7,937.7 4,748.7 3,603.3 2,511.0 1,073.4 18.9 4,121.8 2,015.6 1,337.4 768.8 21.5 80.0

Appendix 12

Jul = July, Sep = September. Source: National Statistical Office. Report of the Labor Force Survey. Thailand.

Table A12.4: Social Security (Persons Employed by Firms) Number of Insured Persons by Gender, 19962001 Year 1996 1997 1998 1999 2000 2001 Female 2,696,353 2,920,715 2,765,440 2,935,768 3,017,206 3,029,379 Male 2,893,502 3,164,107 2,652,742 2,743,799 2,792,934 2,835,829 Total 5,589,855 6,084,822 5,418,182 5,679,567 5,810,140 5,865,208

Source: Technical Studies and Planning Division, Social Security Office.

Table A12.5: Social Security (Persons Employed by Firms) Utilization by Benefit Category, 19962001 Year 1996 1997 1998 1999 2000 2001 Sickness 6,373,711 7,623,682 8,923,763 12,003,212 12,606,716 16,067,396 Maternity 289,665 192,361 178,213 167,722 183,692 184,281 Invalidity 277 138 527 393 480 435 Death 11,220 4,492 13,038 12,106 13,434 13,637 Total 6,674,873 7,820,673 9,115,541 12,183,433 12,804,322 16,265,749

Source: Technical Studies and Planning Division, Social Security Office. Appendix 12

57

58

Table A12.6: Child Labor Inspection, 19982000 Less Than 13 Years Old 0 19 0 1315 Years Old Male Female 152 95 38 70 15 52 1518 Years Old Male Female 3,342 6,697 2,493 6,266 1,460 2,776
Appendix 12

Year 1998 1999 2000

Total 10,286 8,886 4,303

Source: Department of Labor Protection Welfare.

Table A12.7: Child Labor Inspection, 20012002 Less Than 15 Years Old Estimate 8 11 Total Number of Persons 13 85 Child labor Male Female 1,270 2,659 1,581 2,408

Year 2001 2002

Total 3,929 3,989

Source: Department of Labor Protection Welfare.

Figure A12.1: Wage of Employees by Level of Income and Sex, 2002

80 70 60 50 40 30 20 10 0 Below 3,501 3,5016,500 6,50110,000 10,00120,000 20,00130,000 30,000 up Not available Women Men

Source: Ministry of Labor, Thailand.

Appendix 12

59

60

Figure A12.2: Wage of Private Employees by Position and Gender, 2000

69,482

Appendix 12

70,000

60,000 55,359

50,000

B/month

40,000 32,606 30,000

37,765

20,000

18,248 16,126 9,505 10,206

10,000

0 Director Manager Position Women

Source: Ministry of Labor, Thailand.

Chief

Operating Staff

Men

MANAGEMENT RESPONSE ON THE PROGRAM PERFORMANCE AUDIT REPORT ON THE SOCIAL SECTOR PROGRAM IN THAILAND (Loan 1611-THA)

On 8 July 2005, the Director General, Operations Evaluation Department, received the following response from the Managing Director General on behalf of Management:

1. The memo of 25 May 2005 from OED requested Management response to this report. We appreciate that OED consulted with ADB departments and held detailed discussions in preparing this PPAR. We also note that an evaluation workshop was conducted by the Operations Evaluation Mission with the Government of Thailand and key stakeholders in finalizing the findings of the PPAR. 2. Management reviewed this report and supports the important lessons identified, particularly the manner by which ADB responded to the challenges and tensions of the Asian Financial Crisis affecting Thailand. As the report mentioned, urgent liquidity support was needed and ADB expeditiously acted to support the IMF-led rescue package. In addition, the Social Sector Program (SSP) triggered the Government to institute the much needed reforms to address the shortcomings and vulnerabilities of the social sectors in Thailand. However, the SSP loan may have lacked some of the key features of standard program loans that normally have a long-term reform agenda with carefully planned and sequenced reforms fully owned by the Government. Formulating social sector policy reforms requires good knowledge of the legislative system and political economy, as well as deep sector expertise, which can be drawn upon during preparation. Adequate sector analysis, extensive needs assessment, broad consultation, and a well defined monitoring and evaluation system were requirements for the success of program loans. 3. ADB has learned that standard program loans are not necessarily the best lending modality to respond to situations such as the Asian Financial Crisis, as long-term structural reforms need to be addressed in separate, subsequent interventions. Thus, in October 2003, ADB adopted a special program loan (SPL) lending modality to assist ordinary capital resources-eligible developing member countries (DMCs) or graduated DMCs affected by unexpected crisis. Largescale SPLs can be provided as part of an international rescue effort in cooperation with developing partners when the crisis has significant structural dimensions and is likely to have significant social impacts. The lessons learned from the SSP are very relevant and will be taken into consideration in the design of new initiatives in the sector, not only in Thailand but in region. 4. The PPAR states on the design of the SSP (para. 21) that given the severity of the (financial and economic) crisis, the formulation and design of the SSP entailed a necessary trade off between a rigorous design review that would delay the provision of urgently needed liquidity, and speed in providing assistance to prevent further damage to Thailands balance of payments and financial sector; and to ameliorate the adverse impact on civil society, particularly

the poor. We agree with this assessment that the SSP achieved a reasonable balance between speed of processing and depth of preparation. We also agree to the point made by the PPAR stating that on the positive side, the Government demonstrated strong commitment to the reform process at the highest level, and its ability to implement the Program in a timely manner, and its overall compliance with the policy matrix and covenants of the loan were positive outcomes (para. 85). The PPAR found out that the Government continues to implement a broad range of policies that are consistent with the achievement of these objectives (para. 84). 5. Management noted the difference between the rating given in the Program Completion Report (PCR) of 2001 as Highly Successful and in this PPAR rating of the Program as Partly Successful. Management agrees that SSPs implicit objective to provide budgetary support to the Government during the financial crisis, thus mitigating the short-term impact on the most vulnerable groups, was achieved at that stage. However, the PPAR found out that with the election of the new Government and appointment of new leadership in various ministries in 2001, many of the SSP projects and activities were dropped and replaced by new initiatives. 6. As recommended by the PPAR, ADB will continue monitoring and supporting the reform process that was in progress at the time of OEM. ADBs recently-opened Thailand Resident Mission will highlight the lessons learned from this Program and share the knowledge with the Government.