1. Record, Need for Change, Constraints, and Strategies 26 October 2006 Bangkok NESDB and World Bank

2. 1. Record: Stellar Growth …Due to Structural Change from Agriculture to Services and Industry US$16 Billion Economy With 22 Million People Achieving Strong Growth over last Four Decades… Per Capita GDP, 1970-2004 GDP Composition, 1970-2004

3. 2. Record: Rapid Poverty Reduction Growth Came with Lower Poverty… … And Higher School Enrollment …More Household Durables… Poverty, 1988-2002 School Participation, 1988-2002 Electricity and HH Durables, 1988-2002

4. 3. Record: Vibrant Communities Crime Rates Low… …And Households Provide Social Services and Participate in Local Groups Drug-related and Violent Crimes, 2000 Household Participation in Social Services and Local Groups, 2001

5. 1. Need for Change: Slower Growth in Productivity and GDP than Other Regions Lower Growth in Labor Productivity… …So that Provincial Level Per Capita GDP Remains Low …Leads to Lower GDP Share… Labor Productivity, 1991-2004 Regional GDP Shares, 1970-2004 Per Capita GDP Map 2002

6. 2. Need for Change: Higher Concentration of Thailand’s Poor …Poverty More Concentrated In the Northeast Today Than in the Past Lower Rate of Growth Led to Lower Poverty Reduction…

7. 3. Need for Change: Strain on Communities …They Also Lead to more Migration Resulting in “many problems” in Villages… …Including Missing Young Adult Population Group NRD2C Survey, MOI While Remittances from Migrants Have Helped to Reduce Poverty… Poverty and Remittances

8. 1. Constraint: Primate City Lowest Urbanization… …Which Inhibits the Development of Secondary Cities in Outlaying Regions …Due to Thailand’s Exceptional Degree of Primacy… Urbanization Rate City Rank by Population Size Primacy Indices by Country

9. 2. Constraint: Inability to Attract Manufacturing Spatial Distribution of Manufacturing Employment 2001/2 Manufacturing Employment by Type, 2001/2 Manufacturing GDP by Region, 1991-2004 …So the Contribution of Outlaying Regions to Manuf. GDP Remains Low… Primacy Leads to Clustering of Manufacturing Sector around Bangkok… …As Skill- and Capital- Intensive Industries Fail to Take off

10. 3. Constraint: Ineffective Investment Incentives BOI Investment Certificates, 2001-Apr 2005 BOI Investment Promotion not Benefiting Outlaying Areas… …Due to BOI Zones Borders… …And Concentration of Industrial Estates in the Extended Bangkok Area

11. 4. Constraint: Lack of Wage Jobs While Unemployment is Problem only for the Young… …Wage Jobs are Harder to Come by… …And Monthly Wage Jobs Are Few-in-Between… …And Require Good Skills …Especially within Manuf. & Agric. … Unemployment Rate Feb 04 Wage Empt Feb 04 Monthly Wage Empt Feb 04 Employment By Sector Feb 91/96/04 Employment By Education Feb 91/96/04

12. 5. Constraint: Lack of Well-Paid Jobs Monthly Wages by Education Feb 91/96/04 Returns to Education, Monthly Wages, Feb 91 to Feb 04 …And Vocational Education Fetches High Wage Premium While Upper Secondary Doesn’t Skills also Increase Wages Among Monthly Wage Workers…

13. 6. Constraint: Poor Cross-Border Infrastructure Transport Infrastructure Adequate… …As is Infrastructure Across the Border Rural Fixed Phone Lines (Per 1,000 Rural Pop.) Northeast Transport Map …While Communication Infrastructure is Lagging…

14. 7. Constraint: Little Cross-Border Trade …Their Economies have Become Larger… As GMS Countries Have Grown Faster than the Northeast over the Last Decade… …And Thailand’s Exports to GMS Have Increased… …But Exports Continue to Be via Sea Rather Than Land GNI Per Capita GDP, 1995 to 2003, US Dollar Thailand Exports by Country, 1980-2004 Export Companies by Regions 2004

15. 8. Constraint: Low Agricultural Productivity Agricultural GDP by Region, 1970 to 2004 Agricultural Labor Productivity, 1991 to 2004 Farm Households by Type 2002 Farming Households and Number of Poor 2002 Northeast Contributes Less than South and Center… …And Has Lowest Labor Productivity Among All Regions… …As Rice Farming, Which Dominates In the Northeast,… …Is Subsistence Production of Poor Households

16. 9. Constraint: Low Yield Varieties Northeast Specialized in Low-Yield Rice Varieties: Glutinous Rice – Consumed Little Outside the Northeast… …As Well As Hom Mali (Jasmine) Non-Glutinous Rice – Sold Also Internationally Most of Thailand’s Silk Farmers Use Native Varieties… …And Most of Them Live in the Northeast… …And Production of Local Rice and Silk Varieties More Costly Than Major Competitors Rural Households Production 2002 (%) Production Volume 2002 Silk Farmer by Type 2002 (%)Silk Farmer by Region 2002 (%)

17. 10. Constraint: Lack of Water Yields Kept Low By Lack of Dry-Season Farming… Villages with Many Problems in Dry-Season Farming (%) …As Large-Scale Irrigation Not Suitable… …And Droughts Frequent

18. 11. Constraint: Low Public Spending Central Government Spending by Region, FY99 to FY03 Northeast Spending by Type, FY99 to FY03 Northeast Public Spending by Sector FY03 Northeast Receives Less Public Resources Than Other Regions… …And Very Low in Agriculture …Due to Lower Capital Spending…

19. 12. Constraint: Low Capacity Even Though Fewer Civil Servants And Lower Wages… Civil Servants Per Capita (Per 100) and Monthly Wages 2001 Northeast Spending By Type (%) FY99 to FY03 Monthly Income by Position 2001 …As Civil Servants Less Qualified than Elsewhere… … Almost Half of Public Spending For Wages, more than Other Regions

20. Agenda: Three Principles …Is Good for the Northeast What is Good for the Greater Mekong Subregion… What is Good for the Poor… What is Good for Thailand… I III II

21. Northeast Growth Dependent on Thailand Growth Northeast tracks growth in Thailand closely Northeast largest sector is services – sustained by migrant remittances Policies to Support Thailand Growth Improving the business environment for manufacturing in Central and East: addressing deficits in infrastructure and business services, such as improvements in the logistics system and the provision of one-stop government centers Sustaining high quality business and producer services in Bangkok: focus on urban mass transit infrastructure and communication Agenda: Principles and Policies I. What is Good for Thailand is Good for the Northeast

22. Economic Convergence Dependent on Meeting Three Challenges Skills Service delivery to rural areas Local governance Policies to Support the Poor Access to vocational education; Improved teaching standards Geographic targeting; Community poverty programs; Off- farm diversification; Higher value-added of agricultural products; Small-scale irrigation; Weather risk insurance Strengthening and empowering public administrations from villages to province; Mandate and funds to improve the local business climate to attract investment; Power for municipalities to support the development of secondary cities Agenda: Principles and Policies II. What is Good for the Poor is Good for the Northeast

23. Promoting and Integrating with a prosperous GMS to turn Northeast from land-locked to being land-linked Reducing structural and institutional impediments to the movements of goods, people, and capital Example ASEAN Policies to Support GMS Overcoming inadequate transport and communication linkages and promoting common networks in transport, power distribution, trade and commerce Complement physical investments by investments in easing processes and building capacity: harmonization of legal and regulatory frameworks and the facilitation of cross-border flows Agenda: Principles and Policies III. What is Good for the Greater Mekong Subregion is Good for the Northeast

24. THANK YOU!