Document of The World Bank Report No: ICR2998 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-77230) ON A LOAN IN THE AMOUNT OF US$1BILLION TO THE KINGDOM OF THAILAND FOR A PUBLIC SECTOR REFORM DEVELOPMENT POLICY LOAN March 21, 2014 Poverty Reduction and Economic Management Unit East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective 28 February 2014) Currency Unit = Thai Baht (THB) 1.00 = US$ 0.031 US$ 1.00 = THB 35.52 FISCAL YEAR October 1 – September 30 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ASEAN Association of Southeast Asian Nations DPL Development Policy Loan GFMIS Government Financial Management Information Systems IFI International Financial Institutions IMF International Monetary Fund JICA Japan International Cooperation Agency M&E Monitoring and Evaluation MOF Ministry of Finance OECD Organization for Economic Cooperation and Development OPSPQ Operations Policy and Quality PD Program Document PDM Public Debt Management PDMO Public Debt Management Office PDO Program Development Objective PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PSRDPL Public Sector Development Policy Loan RTG Royal Thai Government TKK Thai Kem Kaeng Vice President: Axel van Trotsenburg Country Director: Ulrich Zachau Sector Director: Sudhir Shetty Task Team Leader: Mathew A.Verghis ICR Team Leader: Douglas M. Addison THE KINGDOM OF THAILAND PROPOSED PUBLIC SECTOR REFORM DEVELOPMENT POLICY LOAN (PSRDPL) CONTENTS Data Sheet B. Key Dates .................................................................................................................................... i C. Ratings Summary ........................................................................................................................ i D. Sector and Theme Codes............................................................................................................ ii E. Bank Staff ................................................................................................................................... ii F. Results Framework Analysis ..................................................................................................... iii G. Ratings of Program Performance in ISRs .................................................................................. v H. Restructuring (if any) ................................................................................................................ vi 1. Program Context, Development Objectives and Design ............................................................ 1 2. Key Factors Affecting Implementation and Outcomes ............................................................ 10 3. Assessment of Outcomes .......................................................................................................... 14 4. Assessment of Risk to Development Outcome ......................................................................... 20 5. Assessment of Bank and Borrower Performance ..................................................................... 20 6. Lessons Learned........................................................................................................................ 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners........................... 23 Annex 1. Bank Lending and Implementation Support/Supervision Processes............................. 24 Annex 2. Stakeholder Workshop Report and Results................................................................... 25 Annex 3. Summary of Borrower's ICR and/or Comments on Draft ICR ..................................... 26 Annex 4. List of Supporting Documents ...................................................................................... 39 Map IBRD 33495 A. Basic Information Public Sector Country: Thailand Program Name: Development Policy Program ID: P114154 L/C/TF Number(s): IBRD-77230 ICR Date: 03/21/2014 ICR Type: Core ICR KINGDOM OF Lending Instrument: DPL Borrower: THAILAND Original Total USD 1,000.00M Disbursed Amount: USD 1,000.00M Commitment: Revised Amount: USD 1,000.00M Implementing Agencies: Office of Civil Service Commission Bureau of Budget Ministry of Finance Revenue Department Office of National Economic and Social Development Board (NESDB) Office of Public Sector Development Commission Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 12/10/2008 Effectiveness: 08/31/2012 08/09/2012 Appraisal: 05/05/2009 Restructuring(s): 11/30/2012 Approval: 11/18/2010 Mid-term Review: Closing: 09/30/2012 06/30/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Satisfactory Performance: Performance: i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating: Performance any) Potential Problem Program Quality at Entry No None at any time (Yes/No): (QEA): Problem Program at any Quality of Supervision No None time (Yes/No): (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 92 92 General industry and trade sector 8 8 Theme Code (as % of total Bank financing) Administrative and civil service reform 17 17 Infrastructure services for private sector development 9 9 Macroeconomic management 8 8 Managing for development results 33 33 Public expenditure, financial management and procurement 33 33 E. Bank Staff Positions At ICR At Approval Vice President: Axel van Trotsenburg James W. Adams Country Director: Ulrich Zachau Annette Dixon Sector Manager: Mathew A. Verghis Vikram Nehru Program Team Leader: Mathew A. Verghis Mathew A. Verghis ICR Team Leader: Mathew A. Verghis ICR Primary Author: Douglas M. Addison ii F. Results Framework Analysis Program Development Objectives (from Project Appraisal Document) The objectives of the PSRDPL are to assist the Royal Thai Government (RTG) in its response to the financial crisis and to support institutional development in the public sector by: (i) improving the effectiveness of the public financial management framework through better governance and accountability; (ii) enhancing the skills and performance of the civil service; and (iii) improving quality and timeliness of service delivery. Revised Program Development Objectives (if any, as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Achieved Indicator Baseline Value Values (from Revised Target at Completion or approval documents) Values Target Years GDP [growth] is at least one percent higher in 2009 relative to [what it would have been] without Indicator 1 : [the] stimulus. Value (quantitative or Qualitative) Date achieved Comments Achieved. GDP projections for 2009 by the Government, IMF and the World Bank before the (incl. % stimulus package was announced were a contraction of around 3 to 3.5 percent of GDP. The actual achievement) outcome was a contraction of 2.3 percent. Reduction in the difference between budget requests by sector ministries and outer year budget Indicator 2 : projection in the MTEF. Value (quantitative or Qualitative) Date achieved Comments Achieved. Difference between budget requests by sector ministries and outer year budget (incl. % projection reduced from 62.3% of FY13 budget to 48.5% of FY14 budget. achievement) Results of ex-post assessment of expenditure programs and projects for FY09 inform budget Indicator 3 : allocations for FY11. Value (quantitative or Qualitative) Date achieved Comments Achieved. Results from the ex-post assessment of expenditure programs and projects for FY09 (incl. % were used to inform budget allocations for FY11. achievement) Improvement in PEFA score on multi-year perspective in budget planning from current "C" in Indicator 4 : 2009 to "B" by 2011. Value (quantitative or Qualitative) Date achieved Comments Achieved. PEFA indicator PI-12, on multi-year perspective in budget planning, improved to B in (incl. % 2011 from C in 2009. The key factor was a reduction of about 20 percent in the difference between achievement) outer-year MTEF estimates and agency requests. iii Original Target Formally Actual Value Achieved Indicator Baseline Value Values (from Revised Target at Completion or approval documents) Values Target Years Indicator 5 : Consolidated financial statement certified by the Office of the Auditor General for FY11 by 2012. Value (quantitative or Qualitative) Date achieved Comments Partially achieved. At the end of September 2013, the government financial statements for FY09 (incl. % were certified by the Office of Auditor-General. MOF has submitted the government financial achievement) statements for FY10-12 to the Auditor-General for auditing. Improvement in PEFA score on effectiveness of internal controls improve from C+ in 2009 to B in Indicator 6 : 2011. Value (quantitative or Qualitative) Date achieved Comments Achieved. PEFA indicator PI-20 on effectiveness of internal controls improved from C+ in 2009 to (incl. % B in 2011. Based on Comptroller General's audit rating of high compliance with the internal control achievement) framework. Indicator 7 : Budget-to-actual reports prepared and published for the first time starting FY12. Value (quantitative or Qualitative) Date achieved Comments (incl. % Achieved. Budget to actual reports are being prepared at the aggregate level. achievement) Indicator 8 : Reduced reconciliation errors in consolidated financial reports. Value (quantitative or Qualitative) Date achieved Comments (incl. % Achieved. Reconciliation errors reduced allowing for OAG certification of audit reports for FY11. achievement) Improved transparency by providing public access to the year-end financial statements, in addition Indicator 9 : to the current public access to the annual budget documentation, in-year budget execution reports and external audit reports by 2011. Value (quantitative or Qualitative) Date achieved Comments Achieved. Thailand publishes the end-year financial statements on the Comptroller General's (incl. % Department website in addition to other required documents. achievement) Indicator 10 : Reduction in interaction between tax payer and collector, reducing avenues for rent-seeking. Value (quantitative or Qualitative) Date achieved Comments Achieved. By implementing the e-filing system, the need for most taxpayers and tax collectors to (incl. % interact has been eliminated. achievement) Indicator 11 : In FY10, each of 40 the agencies [will] reduce their service delivery time, processes, and/or costs iv Original Target Formally Actual Value Achieved Indicator Baseline Value Values (from Revised Target at Completion or approval documents) Values Target Years by 5-10 percent relative to FY09. Value (quantitative or Qualitative) Date achieved Comments Partially achieved. Between 2009 and 2012, number of procedures and number of days for starting (incl. % a business were reduced. Relative costs for starting a business, obtaining electricity, paying taxes, achievement) and cost per shipping container also reduced. From FY11, more than half of the agencies use the new form for reporting systems of OPDC that Indicator 12 : develops the respective KPI's for the Ministerial and Departmental 4-year Operational Plan, thereby reducing overlap between OPDC and BOB reporting systems. Value (quantitative or Qualitative) Date achieved Comments (incl. % Achieved. All central government agencies are now using the new integrated forms. achievement) Increased flexibility within the civil service cadre's as evidenced by staff being able to transfer to Indicator 13 : different agencies within the same technical specialization field by 2010. Value (quantitative or Qualitative) Date achieved Comments Achieved. The OCSC has established the HIPPS and New Wave programs consistent with the 2008 (incl. % Law that have allowed for greater staff mobility and deployment across agencies within the same achievement) specializations. Indicator 14 : Pay differentials between staff [are] subject to performance assessments by 2012. Value (quantitative or Qualitative) Date achieved Comments Achieved. In 2012 the Office of the Civil Service Commission introduced a performance (incl. % assessment system which provides for variable pay increase based on staff performance. achievement) (b) Intermediate Outcome Indicator(s) G. Ratings of Program Performance in ISRs Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 06/25/2012 Satisfactory Satisfactory 0.00 2 01/27/2013 Satisfactory Satisfactory 200.00 v H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring & Key Approved PDO Date(s) Restructuring Changes Made Change DO IP in USD millions The extension enables the withdrawals to be more aligned with the implementation of the RTG's investment plans for FY2013. The extension also helps 11/30/2012 N S S 100.00 lower the cost of swapping the PSRDPL proceeds from US dollars to Thai Baht for the RTG. The baht swap market is quite thin and is therefore volatile. vi 1. Program Context, Development Objectives and Design The Public Sector Development Policy Loan (PSRDPL) is an interesting case study of how political uncertainty and institutional constraints can delay the use of funds despite high technical capacity and a wide consensus on the need for reforms supported by the loan. In many countries, policy actions are delayed or incomplete but funds are disbursed rapidly, in one go, after Board approval. The situation was the opposite in Thailand: the Government quickly completed each agreed action but was slow to use the funds. As a consequence, the PSRDPL stands out with regard to time elapsed between loan appraisal loan effectiveness. Elements of the story appear throughout the ICR template but most particularly in Section 1.7. Political uncertainty also affected the design. Abstracting from the politics, the Government might have been willing to consider a programmatic Development Policy Loan (DPL) with smaller individual loans. What is interesting in this case is that the reforms were sustained despite a single operation and delays in accessing the funds. The PSRDPL marked the start of a re-engagement between the World Bank (IBRD) and the Government of Thailand. This loan became the first major World Bank loan to Thailand since 2003, and the first policy based loan since the aftermath of the 1997 Asian financial crisis. Like many South East Asian economies, Thailand had been reluctant to borrow from the international financial institutions after the 1997 crisis. The World Bank (IBRD) therefore provided little financing to Thailand. The relationship changed in the summer of 2008 when the Government of Thailand approached the Bank to explore the possibility of budget support. Specifically, a request was received by the Bank for a PSRDPL—building on the Bank’s support in this area since the financial crisis—to support a more expansive policy engagement in this crucial reform area and at the same time to support the budget with the aim of increasing public sector investment that had been lagging since the 1997 crisis. The PSRDPL was a stand-alone DPL which was prepared in 2008 and approved in November 2010. The objectives of the PSRDPL were originally focused on institutional development in the public sector. This was to be achieved by: (i) improving the effectiveness of the public financial management framework through better governance and accountability; (ii) enhancing the skills and performance of the civil service; and (iii) improving quality and timeliness of service delivery. The PSRDPL was quickly modified by the World Bank team to help the authorities deal with the emerging Global Financial Crisis and ensuing global recession. As the global crisis became more apparent in 2009, the PSRDPL was doubled in size to US$1 billion and modified to include support to the Royal Thai Government (RTG) in its response to the crisis. The PSRDPL was developed and implemented in an extended period of political and macroeconomic uncertainty. Much of the design for the policy actions in the PSRDPL was conceived in 2008. In December 2008, a new coalition Government led by the Democrat Party took office after the previous ruling party was dissolved by the Constitutional Court. The opposition subsequently staged a series of massive protests. In 2009, these led to the cancellation of an Association of Southeast Asian Nations (ASEAN) +6 summit in Pattaya and riots in Bangkok. In April and May 2010, an outbreak of violence that led to nearly 100 deaths and over one thousand injured. By March 2011, after the November 2010 Board approval, large political protests were again organized in advance of elections. In July 2011, a new Prime Minister was elected in time to preside over the most debilitating flooding seen in the preceding 70 years. More large opposition protests occurred in June 2012 and November 2012. The macroeconomic situation was equally uncertain. At the time the DPL was being developed, the world economy had lurched from a food and fuel price crisis to a global financial crisis to a deep global recession. The new situation was clearly pernicious in its effects but its depth and duration were 1 unknown. Frequent revisions in forecasts by the IMF and by investment firm analysts are but one manifestation of this uncertainty. The PSRDPL was also developed in a climate of general reluctance on the part of many officials and citizens to expose the Government to foreign influence. This reluctance is one of the legacies of the 1997-98 Asian Currency Crisis. This motivated the inclusion in the 2007 Constitution of an article requiring two Parliamentary reviews of any foreign treaty, including borrowing from the international financial institutions (IFI). 1 The first review determines whether or not to authorize negotiations while the second review determines whether or not to accept the outcome of negotiations. In this context, the World Bank team cautioned that “There is also a risk that borrowing from IFIs will be politicized even if the underlying reform programs and the stimulus package are uncontroversial. The same Constitutional article also requires public hearings before proposed treaties can be concluded and full disclosure of the details of each concluded treaty. As a consequence, the PRSDPL is one of a few that includes documentation of consultations with the citizens over the merits of the loan and its purpose. 2 The text also provides a summary prepared by the Ministry of Finance of the key recommendations that came out of those consultations. Equally impressive is the Thai implementation of a website (www.tkk2555.com) that allowed citizens to monitor progress of each Thai Kem Kaeng (TKK) project over time. The consultations and transparency may have ameliorated some of the doubts about borrowing externally. 1.1 Context at Appraisal The PSRDPL was appraised on May 5-7, 2009. The Bank’s PSRDPL Team assessed that economy was beginning to recover from the global financial crisis, although the political strife and substantial dependence on exports highlighted that the recovery was still fragile. In this context, the Government was advancing plans for a three year economic stimulus program worth US$40 billion to be financed primarily from domestic financial markets with limited borrowing from ADB, IBRD, and JICA. The team therefore assessed that the rationale for the PSRDPL remained valid: to assist the Royal Thai Government (RTG) in its response to the financial crisis and to support institutional development in the public sector. At the time of appraisal, Thailand was a middle income country with a population of 66 million and a per-capita GNI of US$3,824 (2009). According to preliminary results from the 2010 census, 44 percent of the population lives in urban municipalities. Socio-economic indicators were comparable to the average for East Asian countries.3 Thailand’s economy is dominated by services, which accounted for 45 percent of GDP and 40 percent of employment in 2009. Sixty eight percent of GDP was exported in 2009, of which 75 percent was manufactures and 15 percent was food stuffs. Thailand has had considerable success in its economic development, with sustained strong growth and impressive poverty reduction. In the decade that ended in 1995, the Thai economy was one of the world’s fastest growing at an average rate of 8-9 percent per year. After recovering from the Asian Crisis of 1997-1998, the Thai economy took off again, with growth averaging about 5 percent in the period 2002-2007 despite a massive tsunami in December 2004. As a result of this sustained growth, the incidence of poverty fell from 42 percent in 1988 to about 9 percent in 2008. Thailand’s economic 1 See Article 190 of the 2007 Constitution. 2 In fact, the consultations were held in three different locations to ensure wide public access. 3 The 2010 UNDP non-income human development index for Thailand was 0.683 compared to an East Asian and Pacific average of 0.692 (includes Hong Kong SAR, China, Korea, Japan and Singapore). 2 growth subsequently slowed because of weak private consumption and investment demand, largely due to the Global Financial Crisis and ongoing political uncertainty. The benefits of success have not been shared equally in Thailand. Some regions, particularly the North and Northeast, have not caught up to the rest of the country in terms of poverty reduction. 4 Although regional disparities are a natural part of the development process, the challenge for the authorities was (and still is) to promote inclusive development through economic integration. Despite the gains in reducing poverty, income inequality remains high and intractable. This implies the need to develop policies and programs to connect the fast growing urban areas with lagging regions, promote more equitable delivery of public services—especially education—and target interventions toward the poorest households and regions. Table 1. Key Macroeconomic Indicators (2008-12) 2008 2009 2010 2011 2012 Real GDP Real GDP growth (%) 1.7 -0.9 7.3 0.3 6.5 Real export growth (%) 5.1 -12.5 14.7 9.5 3.1 Inflation Headline consumer price inflation (%, p.a.) 5.5 -0.9 3.3 3.8 3.0 Core consumer price inflation (%, p.a.) 2.4 0.3 1.0 2.4 2.1 External Account Growth of US$ exports (%) 15.9 -14.0 27.1 14.3 3.1 Trade balance (Billions of USD) 17.3 32.6 29.8 17.0 6.0 Current account balance (Billions of USD) 2.2 21.9 10.0 4.1 -1.5 Current account balance (as % of GDP) 0.8 8.3 3.8 1.2 -0.4 International reserves (Billions of USD) 111.0 138.4 172.1 175.1 181.6 International reserves (as Months of Imports) 11.3 10.3 10.2 9.6 11.8 Total debt service ratio (%) 8.2 7.5 4.7 3.4 4.2 of which: Public (including BOT) 0.7 0.7 0.6 0.6 0.6 Government Finance (fiscal year) Revenue and grants (as % GDP) 17.0 15.6 16.9 18.0 17.4 Expenditures (as % GDP) 17.3 20.3 18.9 19.9 20.0 Overall cash balance (as % GDP) -0.3 -4.7 -2.0 -1.9 -2.6 Total public debt outstanding (as % GDP) 35.3 41.7 39.5 40.0 41.1 Monetary Statistics Broad money (% change) 9.2 6.8 10.9 15.1 10.4 Prime rate (%, e.o.p. minimum) 6.75 5.85 6.12 7.25 7.00 Prime rate (%, e.o.p. maximum) 7.00 6.25 6.50 7.63 7.38 Exchange rate (Baht per 1 USD) 33.36 34.34 31.73 30.49 31.08 Sources: Bank of Thailand and World Bank staff calculations with the exception of export growth which comes from World Development Indicators. Estimates for 2012 are preliminary. At the time of appraisal, the main development challenges in Thailand were sharp contractions in exports and expectations of a sharp slowing of real GDP growth. Strong export growth helped keep real GDP recover from the Asian Financial Crisis. As the impact of the Global Financial Crisis spread, Thai exports plunged in the fourth quarter of calendar 2008 (first quarter FY09). 5 By the end of calendar year 2009, US dollar exports had contracted by 14.0 percent compared to positive growth of 15.9 percent in 2008. At the time, the World Bank 6 and IMF expected real GDP growth in 2009 to contract by approximately 3 percent, assuming an effective stimulus program is put in place, due to the impact of 4 National Economic and Social Development Board and World Bank, 2005. 5 The Thai fiscal year starts October and ends in September. 6 World Bank, 2009. Thailand Economic Monitor, June. 3 political tensions and an extended Global Financial Crisis. 7 This expectation was an important factor in the decision to continue forward at appraisal. By contrast, the most recent, ex-post estimates from the Bank of Thailand are contained in Table 1. Real exports in 2009 did contract sharply by 12.5 percent, but real GDP was more resilient than expected and contracted by only 0.9 percent. The economic downturn had a clear and negative impact on budgetary revenues. In the first six months of FY09, Government revenue amounted to THB588.6 billion (US$16.8 billion), down by 13 percent from the same period in FY08. In fact, ex-post estimates indicate revenues and grants fell to 15.6 percent of GDP in FY09, down from 17.0 percent of GDP in FY08. After seeing the initial impact of the emerging Global Financial Crisis, the authorities set out to stimulate the economy in FY09 through additional spending on transfers and subsidies of around 1 percent of GDP. 8 This was approved in a supplementary budget in early January. Total spending increased by 14.8 percent over the previous year bringing total expenditures to THB955.9 billion or 20.3 percent of GDP, up from 17.3 percent of GDP in FY08. As a consequence of falling revenues and increased outlays, the fiscal deficit increased to THB367.3 billion by the first half of FY09, up from THB155.9 billion in FY08. The IMF projected that the central Government budget deficit would worsen from 0.4 percent of GDP in FY08 to 4.6 percent of GDP in FY09. 9 As Table 1 shows, their estimate was highly accurate. The larger deficit also contributed to more domestic borrowing, elevating public debt to 41.7 percent of GDP in FY09 from 35.3 in FY08. At the time of appraisal, the Government was planning a second economic stimulus program. This program was known as the TKK, meaning “Strong Thailand” and was introduced in May 2009. The TKK was meant to cover FY10-12 at a cost of THB 1.4 trillion (average of 4.8 percent of GDP per year). It included measures to reduce tax liabilities and accelerate previously planned public investments, mainly for infrastructure, that could not be accommodated in the budget and/or spending by state owned enterprises and Government agencies. The Government also launched a debt refinancing scheme that converted expensive informal sector loans to more affordable loans from state owned banks. The authorities proposed that the TKK stimulus be financed outside the budgetary framework due to the limits imposed by the Public Debt Management (PDM) Act. Since the budget for FY10 was prepared at the height of the financial crisis, revenue estimates were low and greatly constrained expenditures because the domestic borrowing ceiling imposed by the PDM Act effectively limits expenditures to 125 percent of expected revenues.10 In light of this constraint to the budget envelope, and wishing not only to maintain the level of public investments but also to provide a boost that would stimulate the economy, the Government decided to finance the TKK program outside the normal framework. Thus the domestic borrowing authority for initial TKK expenditures came from an Emergency Decree passed in May 2009. 11 The authorities sought additional external financing worth US$2 billion (0.5% of GDP 12) from the World Bank, the ADB and JICA for portions of the investment program that could not be accommodated under the constraint on domestic borrowing set by the PDM 7 IMF, 2009. Country Report No. 09/261. 8 Ibid. Tax expenditures added another 0.5 to 0.7 percent of GDP. 9 Ibid. 10 Section 21 of the Public Debt Management Act (2005) stipulates that borrowing may not exceed 20 percent of annual budgetary appropriations. 11 The alternative would have been to amend the threshold in the PDM Act. Not doing so may have been understandably expedient but may also have opened the door to subsequent use of emergency decrees. 12 See Table 4 in the Program Document. 4 Act. The total external support was well within the limit set by the PDM Act (2005) requiring that foreign borrowing shall not exceed 10 percent of the annual budgeted appropriation. The Act also stipulates that foreign borrowing may not be used to finance budget deficits. 13 This implies that expenditures financed from foreign borrowing are necessarily outside the budget. This requirement also complicated implementation since normal budgetary mechanisms for allocation across uses and disbursement of funds were not available. It is worth noting that, while off-budget, (i) the funds did flow through government accounts and (ii) projects funded from the DPL were executed through the normal PFM systems of Thai agencies. The main difference is that projects funded from external sources such as the DPL are chosen by committee, rather than by the Budget Bureau. This creates delays and precludes transparent debate and ratification by Parliament. Price changes were relatively benign. Following the removal of capital controls in March 2008, the Baht initially appreciated in the first quarter of 2008. Global risk aversion subsequently contributed to a stronger dollar and the baht has depreciated in line with other regional currencies. Table 1 shows that headline consumer price inflation (period average) was 5.5 percent in 2008, up from 2.25 percent in 2007, reflecting the rapid run-up in global oil and commodity prices. Inflationary pressures moderated significantly since the fourth quarter of 2008 due to a declining trend in global oil prices. The IMF had projected a period average headline inflation rate of 0.5 percent for 2009. 14 In fact, headline inflation actually fell by 0.9 percent. In December 2008, the central bank reduced the policy rate by 100 basis points to 2.75 percent, citing a moderation in inflationary pressures and slowing real growth. The rate was lowered by another 150 basis points to 1.25 percent in April 2009. These changes contributed to the reductions in the prime lending rate reported in Table 1. The economy began to display signs of a rapid recovery shortly after appraisal. The expectation of the World Bank team at the time of appraisal, as expressed in the draft PD, was that a slow recovery would begin in 2010. Real GDP was forecast to grow by 1.7 percent that year. 15 In fact, officials were asserting in the press as early as July 2009 that the economy had probably begun a recovery and by September 2009 they were confirming this.16 Table 1 shows that the recovery was quite rapid: real GDP growth in 2010 was 7.3 percent, 5.6 percentage points higher than originally forecast. Real exports had also rebounded strongly, growing at 27.1 percent in US dollar terms. These improvements allowed the highly buoyant Government revenue effort to reach 16.9 percent of GDP in 2010, essentially the same effort of 17.0 percent of GDP seen in 2008. Moreover, net portfolio outflows became net inflows from 2010 onward as many of the wealthier economies reduced their interest rates well below Thai deposit rates. The exchange rate (nominal and real) appreciated in response. External reserves remained strong throughout the crisis with ample coverage in terms of imports and in terms of short-term debt obligations. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) The development objectives of the PSRDPL, as approved, were to (a) assist the RTG in its response to the financial crisis and (b) to support institutional development in the public sector by: (i) improving the effectiveness of the public financial management framework through better governance and accountability; (ii) enhancing the skills and performance of the civil service; and (iii) improving quality and timeliness of service delivery. 13 Public Debt Management Act, 2005, section 22. 14 Ibid. 15 The IMF expected a lower growth rate of 1.0 percent in 2010. (IMF WEO, April 2009, p. 73.) 16 The Nation, July 1, 2009 and September 22, 2009. 5 The DPL operation was a core element of the World Bank’s Country Interim Country Partnership Strategy Note (October 2010, Report No. 48799-TH). The Strategy Note had two pillars: (i) assisting the country to recover from the financial crisis; and (ii) helping improve Thailand's competitiveness and sustainable development. The PSRDPL operation was at the center of the Bank’s support in responding to the crisis, while the public sector reforms contributed to the sustainability component of the second pillar. 1.3 Revised PDO The PDOs were not revised. 1.4 Original Policy Areas Supported by the Program (as approved) The program included four policy areas. These are briefly described below. (i) Mitigating the impact of the global financial crisis through fiscal stimulus and investing in infrastructure for long term growth. The program document explained the need for economic stimulus in a very clear manner. The main activity in this area was therefore the implementation of the FY09 stimulus program. (ii) Improving expenditure planning, aligning budgetary resources to development priorities within the Strategic Performance Based Budgeting Framework. According to Section V of the program document, at the time of appraisal, Thailand had a good budgetary system which, with further improvements, could be made even better. Among other things, budget documentation should include more information on the previous year out-turn and the intended use of funds in the upcoming budget. The main activity in this policy area was the adoption of the constitutionally mandated Public Financial Act. The Act includes rules for medium term financial planning, guidelines for estimating expenditures, rules for determining the amount of emergency contingency funds, and rules requiring the inclusion of additional information in the annual budget documents, including an economic overview, the fiscal impacts of tax exemptions, and justification for multi-year obligations. Other activities included increased policy focus on budget formulation through the adoption of revised costing norms and a performance assessment rating tool. (iii) Enhancing effectiveness of budget execution, timeliness of financial reporting, strengthening revenue administration and public procurement. The program document describes a fairly strong set of systems for budget execution and monitoring. Several aspects had, however, been targeted for further improvement including revenue administration, procurement transparency, internal controls, and external audit. Activities in this policy area included improved fiduciary controls, better monitoring and reporting of public finances, increased transparency and disclosure in the use of public resources, submission of Royal Decree on Procurement, simplified procedures for taxpayer compliance, and an improved external audit system. In many cases, the reforms involved cutting technology including electronic real-time monitoring of accounts, geographic information systems for project performance monitoring, electronic based procurement, and improvements to an electronic revenue system installed in 2007. 6 (iv) Strengthening the performance management framework, and improving quality and timeliness of service delivery. The program document (paragraph 126 and Table 8) indicates that the reference to service delivery is focused on reducing the costs of doing business. The program document indicates the RTG has put in place a good system for results based management. No serious deficiencies were observed but a few opportunities for improvement were noted, notably with regard to the civil service—greater employee freedom to work for a variety of agencies in their career could help break a perceived “silo mentality” and help improve coordination across agencies. Activities in this policy area included steps taken by nine working committees to reduce the cost of doing business (shortened service delivery times, streamlined procedures, reduced costs) across a wide range of Government agencies, the negotiation of performance agreements for Government agencies, the harmonization of key performance indicators, and implementation of the Second Strategic Plan for the Thai Public Sector Development. Activities also included adoption of a new Civil Service Act, implementation of a new grading structure for the civil service, and the adoption of a Royal Decree on the integrated administration of the provinces and provincial clusters. These reforms are expected to reduce rigidities in the civil service structure and improve incentives and performance monitoring for civil servants. The program document includes an extra annex (Annex 4) that contains a useful, detailed summary of the Government’s public sector reform program. 1.5 Revised Policy Areas The policy areas were not revised. 1.6 Design options Initial conditions at appraisal ruled out the use of a programmatic series of DPLs. The Bank usually prefers a programmatic series because this helps ensure that reforms are sustained. At the time of preparation, the team was re-engaging after a long hiatus with a Government that was somewhat wary of external borrowing. Moreover, as noted above, substantial political uncertainty further complicated the situation. In this context, a single DPL seemed preferable to a programmatic series of operations even though, under other circumstances, the Government might have been willing to consider a programmatic DPL with smaller individual loans. In addition, a single tranche option seemed appropriate since the authorities fully expected to make use of the funds in support of the TKK. The language of the loan agreement, however, allowed for some flexibility noting that the loan is allocated in a single tranche from which the Borrower may make withdrawals (plural) from the loan proceeds. 1.7 Other significant changes There was a significant change in the schedule. Design, scope and scale, implementation arrangements and funding allocations all remained unchanged. The schedule at the time of the December 2008 Concept Note was ambitious, in line with perceived need coming from the emerging Global Financial Crisis. According to the timetable in the concept note version of the Program Document, the team expected to obtain authorization for appraisal in February 2009 and then proceed to the Board in March 2009. This schedule could have been feasible: all 7 the agreed policy actions had been completed by December other than the FY09 stimulus that was announced in February 2009. Political uncertainty required a change of schedule. As depicted in the timeline in Figure 1, the first Parliamentary approval (to engage in negotiations) was issued on March 24, 2009. Loan appraisal and subsequent negotiations were conducted on May 5-7, 2009. A long delay by Parliament in providing the second approval for the DPL, due the ongoing political uncertainty, resulted in a management decision to delay further processing the DPL for submission to the Board. 17 In fact, there was a 15 month lag between the May 2009 appraisal and the Parliamentary approval on August 17, 2010. Figure 1: PSRDPL Timeline 1rst Parliamentary Approval 2nd Parliamentary Approval Loan Agreement is Signed (Mar. 24, 2009) (Aug. 17, 2010) (May 18, 2012) Concept Note Review Appraisal & Negotiations WB Board Approval Loan Effectiveness Declared (Dec. 10, 2008) (May 7, 2009) (Nov. 18, 2010) (Sep. 9, 2012) Jan-08 Mar-08 May-08 Jan-09 Mar-09 May-09 Jan-10 Mar-10 Jan-11 Mar-11 Jan-12 Mar-12 Jan-13 Mar-13 May-10 May-11 May-12 May-13 Jul-08 Sep-08 Jul-09 Sep-09 Jul-10 Sep-10 Jul-11 Sep-11 Jul-12 Sep-12 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 PM Wongsawat PM Vejjajiva PM Shinawatra Protests GFC Floods World Bank management determined that resumption of DPL processing would require a second review by the Operations Committee. Between May 2009 and the second Parliamentary approval in August 2010, political tensions had not abated, thus reducing the ability to the World Bank to engage effectively with the Government. A mass rally in favor of new elections was staged in December 2009. Many parts of Bangkok was paralyzed between March and May as protestors asked for the removal of the then serving Prime Minister and continued to seek new elections. As noted earlier, this was stopped only after troops were called in. In addition, the Government faced a challenge to its borrowing plans by late May 2009, just a few weeks after appraisal, as the parliamentary opposition sought a review by the Constitution Court of the legality of the emergency decree in support of the FY10-12 TKK. 18 The opposition questioned whether the Government’s plans were in accordance with Article 184 of the Constitution, which allows for such borrowing on an emergency basis, and it also suggests that the Government was trying to borrow more than it needs.19 With this combination of events, and knowing the political situation had not been resolved, the management decision to hold a second OC review for the DPL was understandable and justified. 17 This is documented in the September 10, 2010 distribution memorandum for a second OC review meeting. 18 Economic Intelligence Unit, June 2009. 19 The TKK was subsequently found legal by the court. 8 Within this same time period, the impact of the global crisis came and went: RTG officials were quoted in the press in July and September 2009 as saying the economy was rebounding. 20 By April 2010, the Finance Minister announced that revenues had improved enough that the Government could abandon its earlier plans for domestic borrowing. There were no announcements, however, that the FY10-12 TKK would be discontinued. 21 In addition, the Government maintained its intention to borrow from the World Bank, the Asian Development Bank and the Japan International Cooperation Agency because it sought long-term funds capital imports, notably for rail-system investment. 22 The OC review on September 17, 2010 authorized the team to proceed without modifications. As noted in the September 10, 2010 distribution memorandum to the OC members, the delay in processing the operation provided an opportunity to consider the standard assessment of the prior actions as well as the progress in the forward-looking reform program discussed during negotiations. There no backsliding, despite the political instability, and the reform momentum had been sustained with the implementation of nearly the entire program. Additional progress was made after appraisal and negotiations: (i) the introduction of a performance-based pay system for the civil service; and (ii) the certification of the Government Accounts by the Auditor General for the first time since 2005 following improved reconciliation of accounts. The distribution therefore asked for guidance on the following: It is not possible to renegotiate the loan as this would require new Parliamentary approval. But as mentioned, there has been good progress in the reform program. Does the OC agree that the continued implementation of reforms in a difficult political environment is justification to proceed even though the negotiated prior actions are now somewhat dated? The minutes from the meeting did not specifically address this question. Nor did they address whether support for a stimulus remained necessary, presumably because the FY10-12 TKK had only just begun. It can be inferred then that the OC members concluded the PDOs and associated policy actions remained appropriate. Further modifications to the schedule were required after Board approval. The PSRDPL was approved by the Board in November 2010. The December 15, 2010 Monthly Operational Summary included the expectation that the loan agreement would be signed quickly, by late January 2011. According to interviews, this did not happen until May 18, 2012 for several reasons. First, Government officials were distracted by the political instability leading up to the July 2011 elections. Second, the incoming Government requested a review of the external borrowing from ADB, JICA and the World Bank that took several months. Third, shortly after the new Government took office, the worst floods in 70 years wreaked extensive damage throughout the country, drawing attention away from the TKK and many other activities. Moreover, according to the IMF, the authorities had delayed the infrastructure projects underlying the TKK due to the ongoing political crisis.23 This would have reduced expenditures and thus reduced the need for external financing. The World Bank pressed the Government for a decision to retain or release the funds. The World Bank team regularly asked the Government if it intended to use the funds. By February 2012, the team 20 The Nation, July 1, 2009 and September 22, 2009. 21 One of the reviewers contributing to the second OC Review asked on September 16, 2010 whether it would make sense to explicitly state what might motivate the RTG to cancel the TKK, given the uncertain economic situation in Thailand. 22 The Nation, April 28, 2010. 23 IMF Country Report No. 13/323, page 39. 9 indicated it would cancel the loan and reallocate the funds elsewhere if it did not get a decision to sign the loan by May. This led to a March 26, 2012 request for an extension to the closing date (originally August 16, 2012) and the May 18 loan agreement. The loan was subsequently declared effective on September 9, 2012. 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance Prior (policy) actions 2 through 5 had been completed by the time of the 2008 Concept Review meeting. Prior action 6 was completed in December 2008. Prior action 1 was added after the Concept Review stage, announced in February 2009 and completed by September 2009. Table 2: List of Prior Actions and Conditions from Legal Agreement Single Tranche Actions and Conditions Status Condition: Maintenance of an adequate macroeconomic policy framework fulfilled Prior Action 1: Parliament has approved, and its Government is implementing, an fulfilled economic stimulus package for its Fiscal Year 2009 to mitigate the impact of the global financial crisis. Prior Action 2: The Borrower’s Bureau of the Budget has (a) revised costing norms for fulfilled its Medium Term Expenditure Framework under its budget for Fiscal Year 2008; and (b) taken steps to ensure that the Performance Assessment Rating Tool is implemented in all Government agencies. Prior Action 3: fulfilled a) The Ministry of Finance has: (i) piloted the use of the e-financials accounting module for direct financial reporting from the Government Fiscal Management Information System (GFMIS); (ii) begun undertaking daily reconciliations between the GFMIS and the Treasury Reserve Account and targeted training; and (iii) introduced e-token interface with the GFMIS for secure data access for management reporting by budget entities. (b) The Bureau of the Budget has piloted an e-budget system in the Government’s line ministries for improving links between sector policies and budget requests. Prior Action 4: Nine working committees constituted by the Borrower and representing fulfilled forty Government agencies have taken necessary actions to: (a) shorten their service- delivery times; (b) streamline processes; and (c) and reduce the costs of interacting with Government in ten distinct areas in which they deal with private businesses. Prior Action 5: The Borrower’s Office of Public Sector Development Commission and fulfilled the Bureau of the Budget have harmonized their reporting systems to facilitate the formulation of key performance indicators for a four year ministerial and departmental operational plan covering all Government agencies. Prior Action 6: The Borrower’s Parliament has promulgated the Civil Service Act of fulfilled 2008, and the Borrower’s Office of the Civil Service Commission has taken necessary action to implement a new grading structure across the entire civil service with effect from December 11, 2008. 10 2.2 Major Factors Affecting Implementation: Institutional development in the public sector. Implementation of the DPL program aimed at institutional development in the public sector was strong. This was the result of strong consensus and commitment across three different Governments, sound background analysis, and a design that was highly compatible with the Government’s own, wider program of public financial management reforms summarized in Annex 4 of the PD. The risks identified at appraisal were relevant and the mitigation measures were effective. The program content benefitted from a broad level of consensus among all political parties. As noted in the PD, “Thailand …has a strong bureaucracy which has not been significantly impacted by the political uncertainties and recognizes the importance of continued reforms to enhance Thailand’s competitiveness, and reduce poverty and inequality. As a result—and even over the past several years of political instability and frequent changes in Government—Thailand has continued to move ahead with the design and implementation of a steady stream of reforms across a broad range of issues and areas, including poverty reduction, the financial and corporate sectors, improving the business and investment environments, trade, public sector, governance and social protection. The longevity of the reform movement speaks to the extent to which the changes have been owned by senior members of the bureaucracy and the professionalism of the top tier of the Thai civil service, as well as to a broad level of consensus about these reforms among all political parties.” The program was backed by sound and timely analysis and technical assistance. The design of the operation is underpinned by findings of the Public Expenditure and Financial Accountability (PEFA) assessment (2009), analytical work being undertaken in context of an on-going Public Expenditure Review (underway in 2010), and a review of the Results-Based Management system in Thailand, as well as from technical assistance under the Country Development Partnership with Thailand on Governance and Public Sector Reform. In addition to the substantial analytical work undertaken, the World Bank and the MOF also collaborated extensively on improving the public financial management system for timely and transparent implementation of the TKK. Preparation of the PSRDPL also benefited from work by other institutions including the IMF and the OECD. In addition, extensive engagement has been maintained with Government on the public sector reform program through the country development partnership. Through this, technical assistance was provided for all areas covered under the DPL. The program document highlights the key areas of technical assistance in the section that relates to the World Bank contributions to the reform program. The program design was highly compatible with the Government’s own wider program of public financial management reforms. This was made possible not only by the analytical work but also the World Bank’s long association with the Government’s reform effort since 2001 onward. This wider Government program included reforms in public expenditure management, revenue management, civil service reform, decentralization, and cross-Government accountability and transparency. Box 1 and Annex 5 provide details on World Bank support to the Government program. The risks identified at appraisal were relevant and the mitigation measures were effective. While all policy actions had been completed in advance of appraisal and negotiations, several relevant risks to the continued advancement of the reform program, were identified. The risk of loan politicization was discussed in detail prior to and after appraisal. Several mitigating factors were noted: (i) the original request for the loan was reaffirmed each time the Government changed; (ii) the Ministry of Finance (MOF) had carried out public consultations on the operation and solicited comments on its website; (iii) the loan was submitted to the World Bank Board only after the two required parliamentary approvals were received; and (iv) the stand-alone design of the operation would have been helpful to the 11 Government and/or the Bank in limiting the consequences of any remaining political risk. Implementation risks were judged to be minimal due to the long-established program of public financial management reforms spanning multiple Governments. Implementation risks were assessed as inevitable given the ongoing political turmoil, even though there was widespread consensus in favor of the reforms. Macroeconomic risks were judged to be low, particularly because the economy had started a strong recovery from the Global Financial Crisis. Assisting the Royal Thai Government in its response to the financial crisis Implementation of the program aimed at assisting the Royal Thai Government in its response to the Global Financial Crisis was satisfactory. There was strong consensus over time and across each of the three different Governments that stimulus measures were needed to help ease the impact of the Global Financial Crisis. The design of the FY09 policy action was supported by analytical work and the action was effectively implemented by the authorities well before appraisal and negotiations. Any concern about risk was moot. In this sense, program implementation was highly satisfactory. The original intention of the authorities, and the expectation of the World Bank, however, was that the DPL funds would be fully utilized in FY11 in support of the FY10-12 TKK stimulus program. As noted in Section 1.7 above, this did not happen mainly due to political uncertainties. The assessment in the program document, that implementation risk due to political turmoil was inevitable, is applicable to this outcome. Mitigating measures were not possible. The design of the agreed policy action for implementation of a stimulus program in FY09 was backed by solid analytical work. The team made good use of existing macroeconomic data, household poverty data to establish the need for an economic stimulus. The team also made good use of the Public Expenditure Review underway in 2010 to examine the level and composition of public expenditures in FY09, including the first stimulus program, and for planned spending under the second stimulus program. 24 The Government moved quickly in 2009 to adopt and implement an economic stimulus program. It then followed up with a second, three-year program of continued stimulus through FY12. Thus the degree of commitment was clear: the prior action was met and exceeded. The Bank team was able to rapidly assist in this process and scale-up due to its long-standing engagement with the RTG over many years. The DPL did support a FY13 stimulus effort even though it could not support the TKK as intended. The RTG had observed the economy beginning to slow: according to the IMF, real GDP growth decelerated from 6.5 percent in 2012 (rebounding from the 2011 floods) to only 3.1 percent in 2013. The Government therefore announced a third infrastructure oriented stimulus package of 300 billion baht, or 2.5 percent of GDP for the FY13 budget. 25 Thus, the PSRDPL loan did support the Government’s stimulus efforts, albeit far later than envisioned. While this was a welcome outcome, it is also the case that the funds were disbursed into a fiscal framework that had evolved beyond what the team had so carefully scrutinized in the period 2008-10. In particular, there had not been any new, formal analytical products produced by the DPL team that included an examination of the level and composition of the FY13 budget and the third stimulus program. 26 24 The Public Expenditure Review was published in 2012 as Report No. 67486. 25 Bank of Thailand, Annual Report, Thailand’s Economic Conditions in 2012, page 45. 26 Selected aspects of the 2013 budget were reviewed in the World Bank’s December 2012 edition of the Thailand Economic Monitor. 12 Immediately before appraisal, in April 2009, the main question regarding risk was highly appropriate: whether the political situation and macroeconomic policy stance could justify budget support. 27 At the time, the team continued to expect a real contraction in the economy throughout the remainder of 2009, followed by very low growth in 2010. The team also noted good progress by the Government of the day in consolidating its political position. Thus, they proposed a Board date in early July 2009. As noted earlier, however, political uncertainty caused a delay in bringing the DPL to the Board and caused further delays in the use of the DPL funds. Mitigating measures against disbursement delays may not have been possible. Delays in using DPL funds create an opportunity cost to the extent that the funds could be put to better use in other countries. 28 Thus, some protection against unusually long delays would seem prudent. Under normal circumstances, such protection comes from quickly signing the loan agreement and cancelling loans that go unused beyond the closing date which is set at 90 days past the signing of the loan agreement. In Thailand’s case, the loan agreement was substantially delayed by events largely beyond the control of the Bank or the authorities and the closing date was extended by mutual agreement between the Bank and the Borrower. The DPL design allowed flexibility in the disbursement of funds. The loan was disbursed in several installments, despite the one tranche design, in order to help the Government manage pressure on the exchange rate. Table 3 shows that the DPL was disbursed in five pieces between September 2012 and June 2013. This was done because the authorities wished to use all means possible to reduce pressures appreciating the exchange rate. According to the IMF, Thailand experienced a surge in capital inflows that was stronger than that experienced in the region, beginning in 2012 and peaking in the first quarter of 2013. 29 In the first four months of 2013, the surge led to a sharp appreciation of the Baht (7 percent with respect to the U.S. dollar), which became the strongest performing currency in the region. One way to fight this pressure would have been to disburse the DPL in Baht. This option was explored by the team and the authorities but rejected as infeasible or too expensive. The Government therefore chose the other option, to spread the disbursement of the DPL funds over time. Table 3: PSRDPL Loan Withdrawals Disbursement # Amount (USD) Release Date 1 100,000,000 09/26/2012 2 100,000,000 01/23/2013 3 100,000,000 04/03/2013 4 197,500,000 06/12/2013 5 500,000,000 06/27/2013 In this context, the PSRDPL is almost unique among World Bank DPLs. On the one hand, it is a clear outlier with regard to processing time with 1,192 days between appraisal and effectiveness. In a sample of 562 DPLs, only the Dominican Republic Power Sector DPL had a similar delay (1,254 days).30 On the other hand, according to OPSPQ, the PSRDPL is one of a very few single tranche operations that were disbursed using multiple withdrawals. Interestingly, the US$400 million Public Sector Reform Loan to Thailand in 1999 was also a single-tranche operation disbursed in multiple installments. The 27 Distribution memorandum, April 27, 2009. 28 There are two opportunity costs. The first is the direct cost of not being able to allocate US$1 billion to other countries. The second is the cost of keeping US$1 billion in liquid assets rather than long-term investments for more than two years. 29 IMF Country Report No. 13/323, page 4. 30 The sample mean was 175 days and the median was 140 days. 13 authorities chose to withdraw that loan’s proceeds in two installments one year apart ($200 million in July 2000 and $196 million in July 2001) in order to match its budgetary requirements.31 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: The content M&E design was appropriate for the institution building objectives but minimal use was made of quantifiable outcome indicators that were benchmarked for easy monitoring of progress. The outcome indicators for institution building objectives were drawn directly from the Government’s own PFM program. This facilitated the selection of indicators. Most of the indicators chosen, however, lacked quantifiable measures that were benchmarked at the start of the program and used to monitor progress over time. In at least one case, the outcome indicator also exceeded the capacity of the Government to produce the required data. The outcome indicator for the fourth prior action sought evidence of reduced costs of doing business across 40 agencies in terms of time, number of procedures and monetary costs. Interviews with government officials indicated that they could not track each of these cost measures across all 40 agencies. The M&E design did use benchmark data from the 2009 PEFA exercise, with the expectation that progress could be inferred from the outcome of a second exercise scheduled for 2012. This proved problematic, as it has elsewhere, because the expected second PEFA exercise did not take place. The team has, however, conducted internal follow-up assessments using criteria that are identical to those used in the PEFA. The team prepared the internal assessments based on information from authorities, consulted with them, and mutually agreed on the assessments. The results are recorded in Table 4. The M&E design for assisting the Government in its response to the Global Financial Crisis was not appropriate. Only one indicator was chosen and the construction of the indicator is problematic because it requires knowledge of the counterfactual: what would GDP growth have been without the 2009 stimulus? This is difficult to assess, particularly given the debate in the economic literature about the size of Keynesian multipliers. The choice of GDP outcomes is also problematic with regard to attribution: this variable is not under the full control of the Government. Viable options might have been linked to budgetary targets and service oriented targets taken from relevant safety net and stimulus programs. 2.4 Expected Next Phase/Follow-up Operation (if any): The DPL was a stand-alone operation. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Satisfactory The Program Development Objectives were highly relevant to country priorities and the World Bank’s assistance strategy at the time of appraisal. By March 2009, the Government had sought external assistance from the World Bank and other donors for its FY09 stimulus program. By May 2009, it had discussed the need for external financing for the FY10-12 TKK stimulus program. The decision to implement such a program was wise given the subsequent slow recovery from the Global Financial Crisis 31 From comments received in advance of the second OC review. 14 seen in most of Thailand’s export markets. The original objective to provide support for institutional strengthening was also highly relevant, and all the more so in the context of a needed stimulus. Both objectives were highly congruent with the Bank’s Interim Country Partnership Strategy. The program design was fully appropriate given the strong consensus within both political parties on the need for a stimulus and on the need for continued institutional strengthening, backed by a well-established program of public financial management reforms. Implementation was satisfactory. On the one hand, the prior actions were completed early and well. Moreover, there is clear evidence in the PD and elsewhere that the reform program was subsequently sustained and deepened 3.2 Achievement of Program Development Objectives Rating: Satisfactory All of the PDO indicators were achieved by the end of FY12. The objective of a positive impact on growth from the 2009 stimulus was met, although the outcome may be attributable to other forces beyond the direct control of the Government. As Table 4 shows, all but two of the outcomes associated with institutional strengthening were fully achieved. The outcome indicator for certification of the consolidated financial statement associated with prior action 2 was partially achieved, as was the outcome indicator for reducing the cost of doing business via prior action 4. According to team interviews and the authorities, the PDO achievements were positive: the investment climate (excluding political uncertainty) improved as a result of streamlined procedures and reduced costs in many agencies, fiscal discipline has been maintained, the results-based management system ensures compliance with rules and regulations, the Government continues to improve the GFMIS and make progress with e-procurement. The overarching objectives of financial recovery and continued institutional strengthening appear to be on sustainable paths. The economy began recovering from the Global Financial Crisis in late 2009 and growth has been positive since then, as shown in Table 1. Analysis by World Bank and IMF staff suggest that real growth will continue at a rate of at least 4-5 percent per annum over the next five years while the stock of debt will gradually decline from 41 percent of GDP in 2013 to 34 percent of GDP by 2018. 32 The institutional strengthening objectives are clearly sustainable, even if subject to short-run political shocks, given the long-established nature of the Government’s own, wider PFM reform program which has continued across three different Governments. The links between policy actions and PDO indicators were generally clear. Table 4 includes explanations of how the policy actions and PDO indicators are linked. In almost all cases, the linkages are clear and direct. There are only two exceptions. First, while the objective of a positive impact on real GDP growth from the 2009 stimulus was met, the outcome may be attributable to other forces beyond the direct control of the Government. Second, the content of the fourth prior action and its outcome indicator were essentially identical. On balance, a rating of satisfactory is warranted. 3.3 Justification of Overall Outcome Rating Rating: Satisfactory 32 IMF Country Report No. 13/323, Table 2. 15 The operation‘s objectives, design, implementation, and outcomes were highly relevant to Thailand’s objectives and circumstances at the time of the global financial crisis. The PSRDPL was also fully consistent with the Bank‘s interim CPS in Thailand. The operation’s policy actions were fully consistent with the development policy agenda across three different Governments, resulting in strong country ownership and policy outcomes that are likely to be sustained. 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The PSRDPL may have contributed to poverty reduction through two channels: (i) through the impact of the prior action requiring the adoption and implementation of the FY09 stimulus program; and (ii) through improvements in public financial management that would boost the effectiveness of Government fiscal programs. Table 4: Key Outcome Indicators (as of December 2013) Policy Action Outcome Indicator Causal Link Outcome Status Economic recovery underway supported by fiscal stimulus that helps mitigate the impact of the financial crisis, including progress with implementation of public investment programs to foster long-term economic growth. Prior Action 1: Parliament has GDP [growth] is at least one Budgetary expenditures Achieved. GDP projections for approved, and the Government percent higher in 2009 relative contribute to real GDP growth 2009 by the Government, IMF is implementing, an economic to [what it would have been] through a Keynesian multiplier and the World Bank before the stimulus package for its Fiscal without [the] stimulus. effect. Attribution is a problem, stimulus package was Year 2009 to mitigate the impact however, because there are announced were a contraction of of the global financial crisis. many other forces contributing around 3 to 3.5 percent of GDP. to real GDP growth. According to the National Economic and Social Development Board (August 2013), the actual outcome was a contraction of only 2.3 percent. Thus, this outcome was achieved, to the extent that the counterfactual is accurate. The recovery has been sustained through 2013. A more accountable and efficient public financial management system through improved fiduciary controls, better monitoring and reporting of public finances, increased policy focus on budget formulation, increased transparency and disclosure of the use of public resources, and enhanced external audit capability. Prior Action 2: The Bureau of Improved links between multi- Better budgets and budget Achieved. the Budget has (i) revised year estimates and subsequent forecasts make it easier for (i) The sum of the absolute value costing norms for its Medium setting of annual budget ceiling implementing agencies to link of the difference between Term Expenditure Framework as determined by: (i) reduction plans to policies and easier to FY2013 budget requests by under its budget for Fiscal Year in the difference between budget efficiently execute their plans. sector ministries and outer year 2008; and (ii) taken steps to requests by sector ministries and budget projection based on ensure that the Performance outer year budget projection in MTEF 2012 was 62.3% of the Assessment Rating Tool (PART) the MTEF; (ii) results of ex-post FY2013 budget. The sum of is implemented in all assessment of expenditure FY2014 differences based on the Government agencies. programs and projects for FY09 FY2013 MTEF was reduced to inform budget allocations for 48.5% of the FY2014 budget. FY11 and; (iii) improvement in (ii) Results from the ex-post PEFA score on multi-year assessment of expenditure perspective in budget planning programs and projects for FY09 from current “C” in 2009 to “B” were used to inform budget by 2011. allocations for FY11. (iii) The score for PEFA indicator PI-12, on multi-year perspective in budget planning, improved to B in 2011 from C in 2009. The key factor for 16 Policy Action Outcome Indicator Causal Link Outcome Status improving this performance score is a reduction of about 20 percent in the difference between outer-year MTEF estimates and agency budget requests. The assessment for 2011 was not vetted by the PEFA Secretariat and is unpublished. Prior Action 3: Consolidated financial statement The use of better tools and Partially achieved. At the end certified by the Office of the procedures such as the e-finan- of September 2013, the a) The Ministry of Finance has: Auditor General for FY11 by cials accounting module, e- government financial statements 2012. budget module, daily reconcil- for FY09 were certified by the (i) piloted the use of the e- iation and secure data access, Office of Auditor-General. financials accounting module for will improve Government MOF has submitted the direct financial reporting from capacity to complete financial government financial statements the Government Fiscal reports sooner and with fewer for FY10-12 to the Office of Management Information errors. This, in turn, will Auditor-General for auditing. System (GFMIS); Improvement in PEFA score on increase the confidence of the Achieved. Improvement in the effectiveness of internal controls Government that it can provide score for PEFA indicator PI-20 (ii) begun undertaking daily improve from C+ in 2009 to B in timely public access to its on effectiveness of internal reconciliation between the 2011. financial statements. controls from C+ in 2009 to B in GFMIS and the Treasury 2011. This increase is Reserve Account and targeted predicated on the Comptroller training; and General’s audit statements that rate compliance with the internal (iii) introduced e-token interface control framework (based on the with the GFMIS for secure data Committee of Sponsoring access for management reporting Organizations of the Treadway by budget entities. Commission) as high. The assessment for 2011 was not (b) The Bureau of the Budget vetted by the PEFA Secretariat has piloted an e-budget system and is unpublished. in the Government’s line Budget-to-actual reports Achieved. Budget to actual ministries for improving links prepared and published for the reports are being prepared at the between sector policies and first time starting FY12. aggregate level. budget requests. Reduced reconciliation errors in Achieved. Reconciliation errors consolidated financial reports. reduced allowing for OAG certification of audit reports for FY11. Improved transparency by Achieved. Thailand publishes providing public access to the the end-year financial statements year-end financial statements, in on the Comptroller General’s addition to the current public Department website in addition access to the annual budget to current public access to the documentation, in-year budget annual budget documentation, execution reports and external in-year budget execution reports audit reports by 2011. and external audit reports available on other websites. Reduction in interaction between Achieved. By implementing the tax payer and collector, reducing e-filing system, the need for avenues for rent-seeking. most taxpayers and tax collectors to interact has been eliminated. This reduced opportunities for rent-seeking as well as compliance costs for taxpayers and administrative costs for the Revenue Department. The number of e- filing users has been increasing significantly from 7.7 million in 2010 to 11.8 million in 2013. Improved service delivery through increased public monitoring and oversight over quality and timeliness of services delivered by public agencies, and enhanced internal performance measurement and monitoring by aligning budget monitoring tools with service delivery indicators. Prior Action 4: Nine working In FY10, each of 40 the agencies Decisions by the nine working Partially achieved. Initial costs committees constituted by the [will] reduce their service committees should lead to associated with each agency 17 Policy Action Outcome Indicator Causal Link Outcome Status Government and representing delivery time, processes, and/or reductions in the cost of doing were not benchmarked and data forty Government agencies have costs by 5-10 percent relative to business. on costs in FY10 were not taken necessary actions to: FY09. available. Alternative data prepared for the World Bank (a) shorten their service-delivery publication, Doing Business times; shows positive results in several categories. Between 2009 and (b) streamline processes, and 2012, there were reductions in the number of procedures and (c) reduce the costs of number of days for starting a interacting with Government in business. There were reductions ten distinct areas in which they in relative costs for starting a deal with private businesses. business, obtaining electricity, paying taxes, and cost per shipping container. Prior Action 5: The Office of From FY11, more than half of If reporting systems are Achieved Government Public Sector Development the agencies use the new form harmonized across agencies, integrated different reporting Commission and the Bureau of for reporting systems of OPDC then forms used for reporting systems and established the the Budget have harmonized that develops the respective can be made identical. Government Evaluation System their reporting systems to KPI’s for the Ministerial and in 2011/12. All agencies at the facilitate the formulation of key Departmental 4-year Operational Central Government level are performance indicators (KPIs) Plan, thereby reducing overlap now using the new integrated for a four year ministerial and between OPDC and BOB forms. departmental operation plan reporting systems. covering all Government agencies. A better performing public administration with reduced rigidities in the civil service structure, improved incentives for civil servants, and establishment of a performance monitoring framework for the civil service. Prior Action 6: The Parliament Increased flexibility within the One of the objectives of the Achieved. The OCSC has promulgated the Civil Service civil service cadre’s as Civil Service Act (2008) is to established the HIPPS and New Act in 2008, and the Office of evidenced by staff being able to make it easier for staff to Wave programs consistent with the Civil Service Commission transfer to different agencies transfer between agencies. This the 2008 Law that have allowed has taken necessary action to within the same technical should reduce rigidities in the for greater staff mobility and implement a new grading specialization field by 2010. civil service structure. deployment across agencies structure across the entire civil within the same specializations. service with effect from Pay differentials between staff One of the objectives of the Achieved. In 2012 the December 11, 2008. [are] subject to performance Civil Service Act (2008) is to Office of the Civil Service assessments by 2012. link staff remuneration to staff Commission introduced a performance. Individual staff performance assessment system responding to performance which provides for variable pay based pay should collectively increase based on staff contribute to better public performance. Departments are administration. given a total wage bill increase envelope (6 percent in 2012) which they then distribute to staff based on performance assessments. The PD provides a candid assessment of the impact of the 2009 stimulus. The first stimulus package, while unlikely to have had a large impact on overall GDP, may have helped limit the impact of the crisis on the poor. Disbursements under the first stimulus package are estimated at 0.8 percent of GDP between March and September of 2009. The stimulus package contained a number of measures that likely reached vulnerable households. The old-age pension may have been especially effective, since the elderly are over-represented among the poor and the measure specifically targeted those individuals not receiving formal pensions. Khandker, Koolwal, Haughton, and Jitsuchon (2012) carried out some rather careful analysis of the impact of three components of the FY09 stimulus program on poverty. 33 They found that 33 These were: (i) the extension of free public education to 15 years in the 2009 school year; (ii) the distribution of 500 baht allowances for a period of six months to senior citizens of 60 years or older who do not receive support 18 each of the three programs had a positive but small impact on urban households and no impact on rural households. The PD noted that that the FY09 stimulus measures could have been better targeted. The group judged likely to be most affected by financial crisis was the urban informal sector – contract workers in factories, tourism and construction. For timeliness of implementation, the Government chose to use existing mechanisms – such as the social security system – for reaching the beneficiaries of the consumption measures of the stimulus package. This resulted in benefits falling disproportionally on the urban formal sector despite an attempt to target the stimulus to the poor in the informal sector. An ex-post analysis by Haughton and Khandker (2012) confirms this assessment. They found that the main losers were residents of Bangkok, especially those aged 20–29, and those working in the informal sector in sales and services. Surprisingly, for most other groups, real consumption per capita rose in 2009 relative to 2008. Regarding the second channel, several of the PFM reforms should have contributed to poverty reduction through better public service delivery. In particular, prior action 4 required that 40 Government agencies should reduce the costs of doing business by agreeing to shorten their service- delivery times, streamline processes, and reduce the costs to citizens of interacting with the Government tax collection offices. The incentives to improve service delivery should have been increased by prior action 2, requiring the use of performance assessment tools, by prior action 5, requiring harmonized reporting tools, and by prior action 6 requiring the introduction of performance based remuneration for the civil service. Unfortunately, while these expectations are logical, there have been few if any empirical assessments of the impact of such reforms on poverty in Thailand or anywhere else. Some studies34 have found a correlation between the quality of public financial management and income per capita but this does not imply anything about causation. In addition, poverty and income per capita are only loosely correlated. This, however, should not detract from the intrinsic value of improved service delivery as perceived by the population at large. The PSRDPL was not expected to have any impacts with regard to gender aspects or social impact and there is no evidence that such an impact occurred. (b) Institutional Change/Strengthening The impact of PSRDPL policy actions on long-term capacity and institutional development are expected to be substantial. As noted in section 2.2 above, the policy actions build on a long-standing program of institutional strengthening and are embedded in a long-term program of PFM reforms. The agency performance agreements backed by better monitoring and evaluation systems should be especially powerful in motivating better public service delivery. In addition, the Government continues to implement the performance based remuneration system. 35 Finally, it is the teams’ assessment that the Government continues to further strengthen its PFM systems. from other Government institutions, and who register at local administration offices; and (iii) the provision of one- time 2000-baht subsidies (Saving the Nation checks) to workers who were contributing to the Social Security Fund, to state enterprise employees, and to civil servants who were earning less than 15,000 baht per month. 34 An example is de Renzio, Andrews, and Mills, 2011. 35 It should be noted that new empirical evidence from Thailand and elsewhere suggests pay for performance is not as motivating as originally expected. 19 (c) Other Unintended Outcomes and Impacts (positive or negative, if any) N.A. 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N.A. 4. Assessment of Risk to Development Outcome Rating: Moderate The political turmoil documented in the program document resumed at the time of this Implementation Completion Review. It is not possible to predict how it will be resolved or when. The ongoing political contest does pose a risk for the pace of implementation of new reforms but it should not impact the sustainability of reforms implemented thus far. According to interviews with the team, it does appear that the PFM reform program outcomes supported by the PRSDPL will be maintained, without substantial changes other than continued improvements, regardless of which party or leader is in power at any given moment. Reforms that lead to better public service delivery are likely to be supported under almost any circumstance and all the more so when they have been vetted by Parliament twice and by the public in three consultative meetings. There are no economic threats to the sustainability of the reform program: Thailand has maintained adequate internal and external buffers and is expected to maintain a reasonably strong macroeconomic stance over the medium-term, particularly as the world economy recovers from the Global Financial Crisis. For these reasons, a moderate risk rating is selected. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The World Bank responded quickly to changing circumstances. The World Bank originally expected to bring a US$500 million DPL to the Board that focused exclusively on institutional strengthening in support of the Government’s public investment program. This was to be achieved through a deepening of an already successful program of PFM reforms. When the magnitude of Global Financial Crisis and its probable impact on Thailand became apparent, the World Bank responded quickly by doubling the size of the loan, by negotiating an additional prior action for the adoption and implementation of a stimulus program in 2009, and by including in the program document a fuller assessment of poverty and social impacts of the global economic crisis, the steps that Government is taking to strengthen and expand coverage of social protection programs, and the expected impact of the reforms supported under the Government’s program through this DPL, including the impact on rural and urban populations. The overall quality of entry for the PSRDPL was satisfactory. The analysis of the evolving macroeconomic situation was quite adequate and in line with similar analyses produced by other international financial institutions at the time. Similarly, the design of the operation was well informed by a variety of analytical work conducted inside and outside the World Bank. The choice of policy 20 actions was focused and limited to areas of consensus and ability. The fiduciary and disbursement arrangements were standard with the exception of the clause allowing this single tranche operation to be disbursed either through a single withdrawal or through multiple withdrawals. As noted in Section 2.3 above, the design of the implementation and monitoring arrangements, made in collaboration with the authorities, was very effective. The risk assessment was accurate and including mitigating measures for all relevant risks. There were two unaddressed issues. One was that delays were created within the Ministry of Finance because the PDM Act precluded the use of normal budgetary procedures in allocating externally sourced funds as noted in Section 1.1 above. The other was that of implementation delays and what do if they were excessive (as they proved to be) when mitigating measures were not possible due to the nature of the political turmoil. (b) Quality of Supervision Rating: Moderately Satisfactory The quality of supervision for institution building was satisfactory. The Bank had a long-standing program of support for PFM reforms (see Box 1 in the PD) which the team leveraged well in its supervision efforts. This surely helped facilitate the rapid implementation of the agreed policy actions. In addition, the team was attentive to Government needs in carrying the reform effort forward after the DPL had been approved. Two Implementation Status Reports were completed, one in June 2012 before the loan was made effective, and one in January 2013 after the loan had been partially disbursed. Both were frank in assessing that some PDO indicators had not been completed at the time and that the borrower had asked for technical assistance to complete some aspects of its forward looking reform agenda beyond the already completed policy actions. Interviews with the team indicate that the necessary technical assistance was secured, via two trust funds, and good progress has been maintained. The World Bank may have over-estimated the urgency of the Government’s need for external funding for stimulus purposes. The need for external borrowing diminished in 2010 as the economy quickly rebounded from the contraction in 2009. On April 28, 2010, the Finance Minister announced that the economic recovery had contributed to rising tax receipts and the Government was also in a position to redeem Government bonds worth TBH42 billion in advance—yet he also maintained the Government’s intention to borrow externally from the ADB, JICA and the World Bank for infrastructure projects. It is possible that this would have occurred except for the transition to a new Government. Interviews with the team indicate that the new Government, after examining the purpose of the external borrowing, also preferred to maintain its access to the funds. It is remarkable then that the subsequent Government did not draw on the loan after the devastating flooding in 2011 that caused 815 deaths and approximately US$47.5 billion in damages. In fact, the authorities preferred to use their own resources, particularly the Central Fund Contingency, for immediate flood relief. The DPL resources were subsequently used for projects related to health, education and the rehabilitation of infrastructure. The PRSDPL may have contributed to macroeconomic stability even though the authorities did not make rapid use of the PRSDPL funds. Traders in the financial markets could gain confidence from observing the Bank’s willingness to enter into the Thai environment despite the ongoing uncertainty, with knowledge that the DPL provided a financial buffer and comfort to the authorities that funds could be drawn down quickly if the Central Funds resources fell short. On balance, a combined rating of moderately satisfactory is warranted. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 21 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory Government performance has generally been quite adequate. Ownership and commitment to achieving development objectives was high. The program supported by the DPL benefited from steady implementation with all but two PDO indicators fully achieved, while the remaining two indicators were partially achieved. The beneficiary/stakeholder consultations and involvement were exemplary. The PDMO held three public consultations and put the DPL document on the web to solicit comments. Additionally, the DPL had to receive Parliamentary approval twice. Coordination with other donors and stakeholders was quite adequate. The PDMO coordinated the policy actions well and fiduciary controls were found to be quite adequate. After closing the DPL, budget levels for key reform areas have been maintained: the GFMIS is being upgraded, procurement systems are moving to e-procurement, the civil service law is being implemented, and the focus on doing business better has been maintained. There were a few weak areas. One was the PDM Act requirement that precludes the use of external resources for financing budget deficits, thus implicitly moving the use of DPL funds off-budget. This created extra delays in allocating and disbursing funds, as noted in Section 1.1. Another was the quality of the enabling environment including supportive macroeconomic, sector, and institutional policies. Overall, such an enabling environment exists. Yet, institutional fragmentation made coordination of cross-cutting PFM reforms more difficult than necessary and did create some delays in the follow-on program. A third was the adequacy of monitoring and evaluation arrangements. There was good potential for more of the outcome indicators to use quantifiable measures that could have been benchmarked at the start of the program and monitored for progress as the program proceeded. (b) Implementing Agency or Agencies Performance Rating: Satisfactory Implementation of projected policy actions was delegated directly to the individual agencies. Their commitment to achieving the PSRDPL development objectives was high and effective. The reform program has been internalized into each agency’s operational outcomes and they continue to implement the program. Beneficiary/stakeholder consultations and involvement were highly appropriate. In addition, each implementing agency followed the requirements under the Good Governance Decree 2003 for beneficiary and stakeholder consultations. Each implementing agency appointed staff to function as focal points who worked very closely on the implementation. This helped ensure high readiness for implementation, implementation arrangements and appointment of key staff. Implementation issues were resolved on a timely basis. The focal points coordinated the reform program, and ensured timely provision of information. Fiduciary systems and controls were adequate. Weaknesses at the agency level mirror those at the Government level. While the Government had responsibility for the policy aspects of M&E arrangements, the agencies had operational responsibilities. These were well focused on compliance but more concern for good outcomes was needed. Inter-agency coordination was also in need of strengthening. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 22 6. Lessons Learned The Thailand PSRDPL offers three inter-related lessons that could be useful in situations of substantial and ongoing uncertainty. First, reforms with wide support can be implemented and maintained even during periods of substantial political turmoil. While simply stated, such support is not casually achieved. The Thai outcome was the consequence of several factors: a) the long-standing program of PFM support established in 2001; b) highly desirable objectives such as better public service delivery; c) the selection of policy actions that were limited to areas of consensus and ability; d) the Constitutionally mandated consultations on external treaties (including DPL agreements); and e) the Constitutional mandate for two Parliamentary approvals. Second, while it is common to observe that political turmoil and/or political transitions can affect the pace of DPL program implementation, the Thai case shows something different: these problems can also substantially delay loan utilization well past the date of Board approval even when the macroeconomic framework is acceptable. This can result in the funds being used to support a budget that may not have been as well scrutinized as the budget the funds were intended for. In addition, and this is applicable generally, long delays in the utilization of funds have opportunity costs to the extent that there may be better uses for the funds in other developing countries. Moreover, holding a large volume of funds unused in liquid assets, even for several months, can create an additional opportunity cost in earnings foregone. In this context, there may be some value to the Bank in considering alternative instruments when there is considerable uncertainty (as there was in this case) as to whether the government actually needed the money as opposed to a credible signal of access to funding if and when needed. In such cases, a DPL-DDO might be a viable option. A third lesson is evident as well. Sustained engagement with the Thai authorities over many years, despite the lack of a borrowing program since 1999, allowed Bank to quickly respond to the emerging global financial crisis and recession. The Bank has remained engaged on public finance management reforms since 2001 and had managed to influence reforms through TA and close collaboration. When the crisis broke out and authorities requested support, the Bank could identify high value reforms quickly and scale up support. This is an important point when internal Bank monitoring systems focus mainly on lending volumes. Fourth, it is important to avoid using outcome indicators that are not under the full control of the authorities. This is evident in from the lack of a second PEFA exercise which would have yielded the data needed for some of the outcome indicators. A related point is that it may be possible to use indicators drawn from the PEFA framework without relying on the actual conduct of a PEFA exercise. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies (b) Cofinanciers (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 23 Annex 1. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Ahsan Ali Lead Procurement Specialist EASR1 Procurement Ratchada Anantavrasilpa Senior Financial Sector Specialist EASFP Financial sector Kirida Bhaopichitr Senior Economist EASPT Economic policy Chinnakorn Chantra Procurement Specialist EASRP-HIS Procurement Michael Engelschalk Senior Private Sector Development CICTI Private sector development Frederico Gil Sander Senior Economist EASPT Economic policy Lynn M. Gross Program Assistant EASFP Proof-reader Clive G. Harris Manager WBIPP Infrastructure Public financial Malcolm R. G. Holmes Consultant AFTP1 management Zhi Liu Lead Infrastructure Specialist EASTS Infrastructure Angkanee Luangpenthong Program Assistant EACTF Program analysis Chanin Manopiniwes Infrastructure Economist EASTS Infrastructure Saiyed Shabih Ali Mohib Senior Economist EASPT Public sector economics Blanca Moreno-Dodson Lead Economist PRMPS Public sector policy Vikram Raghavan Lead Counsel LEGOP Legal counsel Ronald Points Consultant .. Financial management Jitendra J. Shah Lead Environmental Specialist ECSEN Environmental issues Public financial David Shand Consultant ECSP4 management Vatcharin Sirimaneetham Research Analyst EASPR Economic policy Ruangrong Thongampai Temporary EASPR Proof-reader Thang-Long Ton Economist EASPW Economic policy Nattaporn Triratanasirikul Research Analyst EASPT Public sector economics Mathew A. Verghis Sector Manager EASP3 Macroeconomics Public financial Anthony John Wiggins Consultant EASPV management Supervision Saiyed Shabih Ali Mohib Senior Economist EASPT Public sector economics Kirida Bhaopichitr Senior Economist EASPT Economic policy (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No. of staff weeks travel and consultant costs) Lending Total: 106.41 437.985 Supervision/ICR Total: 44.71 242.185 24 Annex 2. Stakeholder Workshop Report and Results The Ministry of Finance has summarized the main messages received from the public consultations. These were grouped into four main areas: (i) Rationale for borrowing from abroad: Given the current economic situation in Thailand, most participants agreed on the importance of borrowing to restore the economy and develop infrastructure in Thailand. (ii) Use of the funds: There should be a focus on value for money; since domestic borrowing is larger than foreign borrowing, domestically financed spending should also be monitored closely and local infrastructure projects should have high priority. (iii) Debt management: Debt should be managed efficiently so as not to cause a fiscal burden in the future (iv) Monitoring: There should be close monitoring of the expenditures from loan proceeds to ensure efficiency, transparency and accountability; expenditures financed by domestic debt should also be monitored closely. 25 Annex 3. Summary of Borrower's ICR and/or Comments on Draft ICR Implementation Completion and Results Report for the World Bank Public Sector Reform Development Policy Loan to the Kingdom of Thailand Public Debt Management Office Ministry of Finance March 20, 2014 26 The Global Financial Crisis during 2008 – 2009 has resulted in the collapse of large financial institutions, and downturns in stock markets around the world. Thailand was also suffered from decrease in exports, and higher unemployment rate, resulting in lower economic growth. Thus, the government had policies to stimulate economic growth and domestic investments by increasing government spending. The main sources of fund were from Emergency Decree Stimulus Package II (TKK2012), the Capital Market Development Policy Loan (CMDPL) from ADB in the amount of USD 300 million, and the Public Sector Reform Development Policy Loan (PSRDPL) from the World Bank in the amount of USD 1 billion. The MOF and the related agencies have constructed a public sector reform development policy matrix, which includes four key objectives including: (1) Mitigating the impact of the global financial crisis through fiscal stimulus and investing in infrastructure for long term growth; (2) Improving expenditure planning, aligning budgetary resources to development priorities within the strategic performance based budgeting framework; (3) Enhancing effectiveness of budget execution, timeliness of financial reporting, strengthening revenue administration and public procurement; and (4) Strengthening the performance management framework, and improving quality and timeliness of service delivery. The World Bank PSRDPL supported the government measures in boosting the economy during the crisis in the form of six prior actions negotiated in 2009. We were able to achieve outcome indicators identified in this policy matrix. Regarding the first objective, Thailand was able to recover from the recession. By the end of fiscal year 2013, the government had disbursed under Emergency Decree THB 327,689 million or approximately 93.9 percent of the total budget amount of THB 350 billion under the fiscal stimulus package II program (TKK 2012) and under CMDPL and PSRDPL THB 24,939 million or 64.0 percent. The stimulus has contributed to the growth in real GDP during 2010-2013, except in 2011, when the massive flood hit the various parts of the country and caused the delays in many projects. Because the government had to shift its focus to recovery and reconstruction projects and reprioritize the projects in the pipeline, it caused a delay in budget allocation process as well as disbursement lags from line agencies. 27 The Bureau of Budget (BOB) was able to improve the expenditure planning and reduced the difference between the sector ministries’ budget requests and the outer year budget projection in the medium term expenditure framework (MTEF) from 62.3 percent of fiscal year 2013 budget (based on MTEF 2012) to 48.5 percent of fiscal year 2014 budget (based on MTEF 2013). The Comptroller General’s Department (CGD) has improved on its timeliness to submit the government financial statements to the Office of the Auditor General (OAG) for auditing purpose. The FY2008/09 financial statement was certified by the OAG; however, those of later years are not yet certified. The CGD started to prepare budget-to-actual report, which compares the planned budget and actual disbursement. The reconciliation errors have been reduced significantly in the recent government financial statements and the prior year's errors have been verified and corrected continuously. The training program for accounting staff of government agencies has been redesigned to reflect their needs more effectively. An evaluation program was launched to encourage the agencies to improve the quality of their accounting information steadily. In order to improve the government’s transparency, the financial statements of government departments and agencies are readily accessible from the entities' websites as a crucial part of their annual report publication. The MOF has made available the location of the projects along with their financial information. The CGD is currently undergoing its third phase of e-Government Procurement system (e-GP) development to incorporate the electronic bidding, electronic contract, and supplier grading system features, etc. The government agencies have shortened the public service delivery time. On average, the processing time was reduced by 30-35 percent in relative to fiscal year 2003. More than half of the agencies currently use the new form for reporting systems of the Office of the public sector development commission (OPDC) that develops the respective key performance indicators (KPIs) for the ministerial and departmental four-year operational plan. The government employees can transfer among agencies that require a similar skill set and receive their compensation based on their performance since 2010. 28 The performance-based pay has been applied in all civil service agencies since 2010 and brought about better performance of civil servants as well as efficiency of civil service. Also salary increase is more flexible and fair. Complaints and grievances concerning unfair treatment have been taken care of and considerations have been carried out in a more expeditious manner. Civil servants feel secure from unfair treatment concerning human resource management and compensation management has been administered more efficiently. There were some difficulties that deter us from the prompt implementation of the projects under the PSRDPL. Besides the process under Article 190 of the constitution that require MOF to submit the negotiation framework and draft loan agreement to joint parliament to get approval which took approximately 2 years, the political change and the flood are among the reasons. The major flood in late 2011 caused the damage of nearly THB 1.35 trillion. The manufacturing and agricultural sectors were badly affected. The government had the priority of rebuilding the residential areas and restoring the mentioned sectors first. When Thailand had a new government in August 2011, the already approved projects were reevaluated based on their necessity and urgency, and thus some projects were postponed. The disbursement of PSRDPL was relatively slow due to political instability that caused the reevaluation and reprioritization of the projects. Moreover, funds still available from the TKK 2012 and the loan, with the last disbursement date in Aug 2012. Thus, we had to disburse these loans before we began disbursing the PSRDPL in Sep 2012. The PSRDPL has been completed with the success and the ability of projects to maintain benefit flows. It has enhanced the growth of Thai economy and its competitiveness, and thus improved the living standard of the Thais. We would like to close the PSRDPL and deliver the progress under the policy matrix as attached herewith. In consistent with the loan objectives, we believe that these projects have strengthened the government’s effectiveness in many ways. The projects that are approved under TKK stimulus are spread all over the various parts of the country to make sure that the people in the rural areas have access to the public service. Also, the projects have spurred the economic growth in the local areas, even for the small villages. 29 As for the challenge in managing the World Bank loan, the MOF intended to cover both the exchange rate and interest rate risks by doing swaps back to back with the disbursement. However, due to the large magnitude of the loan and the low liquidity in the swap market, the MOF will have to gradually cover the risk when the swap rate can yield the lower cost of borrowing than the domestic rate. We would be interested in the loan with an affordable swap option attached in the future. In particular, the option that the World Bank offered with the PSRDPL was relatively expensive. As for the advantage of the World Bank loan, the PSRDPL was in the form of program loan, which was supposed to be a quick disbursing loan. It has benefited many small projects that needed funding, but could not otherwise have access to it. The loan has provided Thailand with great flexibility in loan utilization, we however intend to spend the funds toward the infrastructure projects that will benefit the remote areas and improve the quality of public service. In addition, we need to improve on the monitoring and evaluation (M&E) aspects. Due to our limited human resources, the project assessment is usually done by the outsourced consultants. The M&E is crucial for developing a new project design as well as building a framework for future project management. We hope that we will receive the kind support and cooperation from the World Bank through technical assistances to help us develop efficient M&E aspects. Finally, we would like to express our gratitude to the World Bank for the continued support. We are hoping to receive the cooperation from you in the future. Your kind consideration regarding this matter would be appreciated. 30 Attachment to Annex 3: Development Policy Matrix Objectives Prior Actions* Progress since May 2009 Results and Results and Outcome Outcome Negotiated in May 2009 End of FY2013 Indicators Mitigating the impact of Prior Action 1: Parliament has Nearly all of the planned transfer GDP is at least one As of September 2013, the government the global financial crisis approved, and the and tax measures and about half percent higher in disbursed budget under the Strong through fiscal stimulus Government is implementing, of planned infrastructure projects 2009 relative to Thailand 2012 Program (TKK2555) at and investing in an economic stimulus package were disbursed in FY09 for an without stimulus. 327,689 million baht or 93.9% of the infrastructure for long for its Fiscal Year 2009 to overall disbursement rate of 83 Govt. forecast for total budget amount (350 billion baht). term growth mitigate the impact of the percent. Progress has been 2009 GDP in April The economic impact of TKK2555 global financial crisis. slower in FY10 but measures 2009 was -3.0 to spending supported economic recovery taken to speed up implement- -3.5, WB forecast for Thailand. In this connection, real ation together with seasonal was -2.6 percent GDP grew by 7.8%, 0.1% and 6.5% factors could bring actual 2009 outcome during 2010, 2011 and 2012, disbursements back on track. was -2.2. Recovery respectively. Note: Low growth in 2011 has been sustained was due to the negative impact from in 2010. flooding in Thailand. Improving expenditure Prior Action 2: The Bureau of The Bureau of the Budget: Improved links (i) The sum of the absolute value of the planning, aligning the Budget has (i) revised (i) introduced agency level between multi-year difference between FY2013 budget budgetary resources to costing norms for its Medium ceilings in the top-down medium estimates and requests by sector ministries and outer development priorities Term Expenditure term expenditure framework subsequent setting of year budget projection based on MTEF within the Strategic Framework under its budget which reduced the deviation annual budget 2012 is around 62.3% of FY 2013 Performance Based for Fiscal Year 2008; and (ii) between the top-down and ceiling as budget. The sum of FY 2014 differences Budgeting Framework taken steps to ensure that the bottom-up MTEF from more determined by: based on FY 2013 MTEF is, then, Performance Assessment than 5 percent in FY2009/10 to (i) reduction in the reduced to 48.5% of FY2014 budget. Rating Tool (PART) is less than 2 percent in difference between (ii) At the end of 2011, there was one implemented in all FY2010/11: (ii) six budget budget requests by more sub-dimension of PI-12 indicator, Government agencies. appropriation committees sector ministries and in addition to PI-12-ii, that was improved formally considered PART outer year budget to the “B” level. Regarding PI-12-iv sub- results to guide budget projection in the dimension, the majority of important allocations; and (iii) completed MTEF; (ii) results of investments are selected on the basis of guidelines for expenditure ex-post assessment 31 Objectives Prior Actions* Progress since May 2009 Results and Results and Outcome Outcome Negotiated in May 2009 End of FY2013 Indicators policies and programs. of expenditure the Country Strategy. programs and There is no PEFA after 2009. projects for FY2008/9 inform budget allocations for FY2010/11. Improvement in PEFA score on multi-year perspective in budget planning from current “C” in 2009 to “B” by 2011. Prior Action 3: a) The (i) At the end of September 2013 (FY Enhancing effectiveness MOF was able to improve Consolidated Ministry of Finance has: (i) 2012/13), the government financial of budget execution, reconciliation such that in 2010 financial statement piloted the use of the e- statements for FY2008/09 have been timeliness of financial the Auditor General certified for certified by the financials accounting module certified by the office of Auditor General reporting, strengthening the first time since introduction Office of the for direct financial reporting although MOF has proposed already the revenue administration of GFMIS the financial Auditor General for from the Government Fiscal government financial statements for and public procurement statements, for FY2005; (ii) the 2010/11 fiscal Management Information FY2009/10 and FY2010/11 and FY MOF introduced real time year by 2012. System (GFMIS); (ii) begun 2011/12 to OAG for audit purpose. Payment Order interface to the Improvement in undertaking daily Government Fiscal Management PEFA score on (ii) There is no PEFA after 2009. reconciliation between the Information System – “web- effectiveness of GFMIS and the Treasury (iii) CGD has prepared Budget-to-actual online” – to improve accuracy internal controls Reserve Account and targeted reports. and speed of budget execution; improve from C+ in training; and (iii) introduced (iv) Reconciliation errors have been and (iii) implemented the 2009 to B in 2011. e-token interface with the reduced significantly in the recent Executive Information System GFMIS for secure data access government financial statements and the for financial reporting to agency for management reporting by Budget-to-actual prior year's errors have been verified and level management; and (iv) budget entities. reports prepared and corrected continuously. completed integration of GFMIS 32 Objectives Prior Actions* Progress since May 2009 Results and Results and Outcome Outcome Negotiated in May 2009 End of FY2013 Indicators (b) The Bureau of the Budget with e-Budget at BOB published for the Financial statements of government has piloted an e-budget system first time starting departments and agencies are readily in the Government’s line FY2011/12 accessible from the entities' websites as a ministries for improving links crucial part of their annual report between sector policies and publication. budget requests. The training program for accounting staff MOF migrated the government MOF prepared a comprehensive of government agencies has been accounting system from cash plan for accounting reform Reduced redesigned to reflect their needs more basis to accrual including development of an reconciliation errors effectively. An evaluation program was accounting profession, to support in consolidated launched to encourage the agencies to the migration from cash to financial reports improve the quality of their accounting accrual reporting information steadily. Improved In order to improve transparency (v) The office of the Permanent transparency by and management of the second Secretary, Ministry of Finance has put in providing public Fiscal Stimulus projects, MOF place the project financial management access to the year- established in December 2009 a system, which allows the identification end financial comprehensive Project Financial of each project on Google maps using statements, in Management System which GPS coordinates and their financial addition to the publically identifies each project information. current public access on Google maps using GPS to the annual budget coordinates, and reports in real- documentation, in- time on: (i) project financial year budget information; (ii) procurement execution reports documentation; and (iii) physical and external audit progress of projects reports by 2011. 33 Objectives Prior Actions* Progress since May 2009 Results and Results and Outcome Outcome Negotiated in May 2009 End of FY2013 Indicators MOF implemented program for MOF: (i) operationalized the e- (vi) e-GP applies for all government improving public procurement Government Procurement system agencies, state enterprises and local comprising: (i) introduction of in April 2010 including posting authorities. Each procurement agency electronic-based procurement of procurement information by must register and fill in the electronic system; (ii) initiating the public agencies on the internet; government procurement form through procurement monitoring system and (ii) submitted procurement the CGD’s website. In detail, the by using the OECD-WB decree to Council of State development of electronic government Baseline Indicator System procurement is divided into 3 phases. framework; and (iii) submitted Thailand is in the process of developing the Royal Decree on Public the 3rd phase of the Electronic Procurement to the State Government Procurement (e-GP) System Council in 2008 to include E-bidding, E-market, Supplier grading system, Price Performance, Certified Authority/digital signature, and e-Contract. All government agencies have to input their procurement information through e- GP Web-site. Also, according to NACC’s regulation, suppliers are required to register on e-GP in order to get the important procurement information such as bid announcement, bid document, etc. In term of rule’s amendment, CGD already submitted procurement decree to Council of State since 2008. 34 Objectives Prior Actions* Progress since May 2009 Results and Results and Outcome Outcome Negotiated in May 2009 End of FY2013 Indicators In 2007 the Revenue Revenue Department upgraded Reduction in By implementing the e-filing system the Department allowed taxpayers the e-filing application systems interaction between compliance costs of taxpayers and the to obtain tax forms, file tax, in 2009 system capacity to tax payer and administrative costs of the Revenue request for tax refund, and make deliver services in a timely and collector reducing Department, have been decreased. Also, payments electronically, hence effective manner avenues for rent- the number of e-filing users has been reducing compliance costs of seeking increasing significantly from 7,758,254 taxpayers and administrative in 2010 to 8,403,939 in 2011, 9,623,590 costs of the revenue department in 2012 and 11,775,115 in 2013. within an e-Revenue system Strengthening the Prior Action 4: Nine working In FY2010, each of The public agencies were able to reduce The nine committees have performance management committees constituted by the 40 the agencies work process and time duration by continued to function and in framework, and Government and representing reduce their service 30-35% during the past ten years and 2010, Thailand’s rank in Doing improving quality and forty Government agencies delivery time, extend this improvement to all work Business was improved to 12. timeliness of service have taken necessary actions processes, and/or processes. After that, OPDC set up a key delivery to: (a) shorten their service- costs by 5-10% performance indicator (KPI) success delivery times; (b) streamline relative to FY2009. level of weighed average percentage of processes, and (c) and reduce work processes and cycle time reduction the costs of interacting with to stimulate public agencies to pay more government in ten district attention to service improvement. areas of dealing in which they deal with private businesses.ove the business climate. All central government agencies OPDC decentralized in 2009 KPI From FY2010/11, covered by a system of determination to four ministries more than half of the Performance Agreements – Ministry of Finance, Ministry agencies use the new stipulating agency outputs 35 Objectives Prior Actions* Progress since May 2009 Results and Results and Outcome Outcome Negotiated in May 2009 End of FY2013 Indicators against service delivery targets. of Industry and Commerce, form for reporting Ministry of Energy, and Ministry systems of OPDC of Environment and Natural that develops the Resources respective KPI’s for the Ministerial and Departmental 4-year Operational Plan, thereby reducing overlap between OPDC and BOB reporting systems. (Baseline was 0 in 2008/9). Prior Action 5: The Office of In 2009 a Public Audit and Public Sector Development Evaluation Committee was Commission and the Bureau established with participation of the Budget have by the concerned agencies to harmonized their reporting review all the different RBM systems to facilitate the systems and make concrete formulation of key recommendations how these performance indicators (KPIs) systems could be linked and for a four year ministerial and integrated so as to move to an departmental operation plan integrated results management covering all Government framework across the public agencies. sector. The Public Auditing and Evaluation Committee in 2009 conducted a review of results based management systems in government in order to consolidate and integrate them appropriately 36 Objectives Prior Actions* Progress since May 2009 Results and Results and Outcome Outcome Negotiated in May 2009 End of FY2013 Indicators The Second Strategic Plan for As part of the implementation of Increased flexibility The government employees can transfer the Thai Public Sector the Thai Public Sector within the civil among agencies that require similar Development (2008-2012) was Development (PSD) plan the service cadre’s as skill sets. approved by the Cabinet in OPDC launched the Role of the evidenced by staff August 2008. This strategy has State analysis in 2010 across 13 being able to The performance-based pay has been four key strategies: (i) develop sectors of the economy transfer to different applied in all civil service agencies since service quality and work process agencies within the 2010 and brought about better to best respond to public needs, same technical performance of civil servants as well as (ii) enhance a comprehensive specialization field efficiency of civil service. Also salary work modality with involvement by 2010 and pay increase is more flexible and fair. of all stakeholders, (iii) raise differentials between Outcome: Compensation management public sector’s competency and staff subject to has been administered more efficiently. productivity to be on par with performance Result: Complaints and grievances international standards, and assessments by 2012 concerning unfair treatment have been (iv) strengthen ethics and good taken care of and considerations have governance. been carried out in a more expeditious manner. Prior Action 6: The Outcome: Civil servants feel secure from Parliament promulgated the OCSC implemented performance unfair treatment concerning human Civil Service Act in 2008, and based pay from April 2010, resource management. the Office of the Civil Service thereby phasing out the common Commission has taken ‘step wise’ compensation scheme necessary action to implement a new grading structure across OCSC established the Merit the entire civil service with System Protection Commission effect from December 11, (MSPC) to: (i) advise and 2008. prevent government agencies from issuing or regulating The new range-based salary unmerited rules and regulations, structure aligned with the new (ii) consider appeals, and position classification was 37 Objectives Prior Actions* Progress since May 2009 Results and Results and Outcome Outcome Negotiated in May 2009 End of FY2013 Indicators implemented to allow for (iii) consider complaints differentiated salary structures across the 4 professional streams. Royal Decree on Integrated Bureau of the Budget provided Provincial Administration has more Administration for Provinces allocations for Provincial involvement in the Budgeting System. and Provincial Clusters (2008) Administrative Organizations In addition to budgetary allocations for was issued on December 25, from FY2009/10 budget year – provincial clusters and provincial 2008 and Bureau of the Budget in addition to provincial clusters, administration since 2008/2009, provided budgetary allocations consistent with the Royal Decree budgetary allocations for central agencies for provincial clusters starting on Integrated Administration for are required to be re-aligned with FY2008/09 Budget. Provinces and Provincial provincial plans. Moreover, since Clusters FY2013, provincial plans are major factors in making budget decisions. *The prior actions in bold are associated with the World Bank PSRDPL. 38 Annex 4. List of Supporting Documents Bank of Thailand, Annual Report, Thailand’s Economic Conditions in 2012. de Renzio, Andrews, and Mills, 2011., Does Donor Support to Public Financial Management Reforms in Developing Countries Work? An Analytical Study of Quantitative Cross-Country Evidence, Working Paper 329, Overseas Development Institute. Economic Intelligence Unit, June 2009. Haughton and Khandker, 2012. The Surprising Effects of the Great Recession: Losers and Winners in Thailand in 2008–2009, Policy Research Working Paper 6255. IMF, Country Report No. 09/261. IMF, Country Report No. 13/323. Khandker, Koolwal, Haughton, and Jitsuchon, 2012. Household Coping and Response to Government Stimulus in an Economic Crisis: Evidence from Thailand, Policy Research Working Paper 6016. National Economic and Social Development Board and World Bank, 2005. Thailand Northeast Economic Development Report. Royal Government of Thailand, 2005. Public Debt Management Act. Royal Government of Thailand, 2007. Constitution of the Kingdom of Thailand. The Nation, various issues. http://www.nationmultimedia.com/index.php World Bank, 2009. Thailand Economic Monitor, June. World Bank, 2010. Thailand: Public Sector Reform Development Policy Loan (PSRDPL), Report No. 48331-TH. World Bank, 2012. Thailand: Public Finance Management Report, Report No. 67486. World Bank, 2012. Thailand Economic Monitor, December. World Bank, various review meeting minutes, project status reports and other loan memoranda. United Nations Development Program, 2010. Human Development Report. 39 IBRD 33495 To o 96E Kengtung 104E To o ng Pan Möng 20N 20N Chiang Rai LA O Gulf YA N MAR M YA MAR Mae Hong Son PEO PLE'S VIE TNA VIET NA M Phayao of Chiang Mai REP DEM. REP. To nk i n Nan Lamphun o To Doi Inthanon Louangphrabang g Lampang on (2,576 m) ek an M Phrae N Piin g ng a ng Nong W Khai Uttaradit Loei Udon Nakhon Phanom Thani Sukhothai Nong Bua Sakon Lamphu Nakhon Tak Phitsanulok Kamphaeng K h o r a t Kalasin Mukdahan o To Tri Quang Tri To o M Khon ek Mawlamyinet Phet Phetchabun Ch Phichit ong Kaen ao Maha Pasak Roi Et pra 16N Sarakham 16N y Plateau a Chaiyaphum Kha Yasothon ha Kh Nakhon Ch Amnat Chareon Kh aen Sawan i Ubon en g Uthai Thani Ratchathani n Chai Nat Mu Buri Ram Si Sa Ket Sing Buri Lop Buri Nakhon Surin Ratchasima Ang Thong Suphan Buri Saraburi Ayutthaya Nakhon Nayok Kanchanaburi Pathum Thani Prachin Buri Nakhon Pathom Nonthaburi Sa Kaeo BANGKOK Samut Sakhon Chachoengsao An d a ma n Ratchaburi Samut Samut Prakan Chon Songkram Buri Sea Phetchaburi CA MBO DIA DI A Rayong o To Chanta Phnom Penh Buri Trat 12N Ko Rong 12N Prachuap Khiri Khan Ko Kut THAILAND Gulf Chumphon of Ranong T hailand Ko Phangan Ko Samui 104E Surat Thani Phangnga Nakhon Si Thammarat TH A I L A ND Krabi Ko Phuket 8N 8N PROVINCE CAPITALS* Phuket Phattalung NATIONAL CAPITAL Trang RIVERS Songkhla MAIN ROADS 0 50 100 150 Kilometers Pattani RAILROADS Ko Tarutao Satun Narathiwat 0 25 50 75 100 Miles Yala PROVINCE BOUNDARIES* This map was produced by the Map Design Unit of The World Bank. INTERNATIONAL BOUNDARIES The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank o To Group, any judgment on the legal status of any territory, or any o To Taiping aiping Bertam Bertam endorsement or acceptance of such boundaries. *Province names are the same as their capitals. 100E LAY SI MA LAY SIAA JANUARY 2005