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World Bank Thailand OfficeBangkok, 14th Floor Tower A Country Director: J. ShivakumarDietheim Towers Comments to:January 1999 93/1 Wireless Road Sarah Adam, Chris Chamberlin

Bangkok 10330, Thai land sadant@ worldbank.org U(662) 256-7792 cchatnberlin @ worldbank.org

The views expressed in the Tlhailand Social Moniitor are entirely those of the authors and should not be cited withiout prior pernission. The)'do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. The material containedherein has been obtained from sources believed reliable but is not necessarily comnplete and cannrtot be guaranteed.

Table of Contents

Preface ...................................................... 1I. Introduction ...................................................... 3II. Pre-Crisis: Social Attainments, Vulnerabilities and Early PolicyReforms ...................................................... 5III. Social Impacts of the Crisis ...................................................... 8IV. Responding to the Crisis ..................................................... 17IV. Policy Issues and Questions ..................................................... 22B ibliography ..................................................... 24

The crisis in Thailand, as in other East Asian nations, has led to many severe, unforeseenand sudden impacts, not only in the financial and corporate sectors but also more broadlyin society, with many households enduring losses of wages, jobs, and opportunities.Faced with mounting social impacts, the response of the Government and its civil societypartners has been both substantial and innovative.

The Regional Conference on Social Issues Arising Note: The views expressed in thefrom the East Asian Crisis (Bangkok, Jan. 21-22, Thailand Social Monitor are entirely1999) presents an opportunity for the countries of those of the authors and should notEast Asia and the donor community to share be cited without prior permission.

They do not necessarily representperspectives and leam from each other. The World the view of the World Bank, itsBank's Thailand Office has prepared this inaugural Executive Directors, or the countriesissue of the Thailand Social Monitor as part of the they represent. The materialcontained herein has beenbackground information for conference participants obtained from sources believedand for others interested in the topic. reliable but is not necessarily

complete and cannot beguaranteed.

This first issue of the Thailand Social Monitorpresents a framework (based on the World Bank's East Asia: The Road to Recovery,1998) for addressing social issues, and within that framework, summarizes the unfoldingof the crisis in the social domain. The theme of this issue of the Social Monitor is howThailand has seized the crisis as an opportunity for accelerating the social reform agenda.This agenda combines familiar social reform issues, such as job creation, social security,and employment services, but it also contains what we see as a unique Thai approach toaddressing long-term social problems through investing in the development of localcapacities, social capital and community self-reliance.

Future issues of the Social Monitor will attempt to present the results of ongoinganalysis, assessments and surveys while examining selected topics within the overallsocial policy framework. An important focus will be the equity dimensions of the crisis,that is, the impacts on the poor and their access to safety net benefits.

.Thailand Social Monitor 1 Clthallengefor Social Refbrm

The social aspects of the crisis are inherently complex and difficult to summarize in asingle, brief document. Reliable data is rare, and there is disagreement on theinterpretation of the available information. Rather than impose outside views on theseissues, we have indicated the differing interpretations where appropriate.

We are grateful for sources and advice from many people and organizations, within theThai Government, and outside of govemment in academia, civil society and of coursefrom other donor agencies active in Thailand. Any shortcomings of this first SocialMonitor are, however, completely our own.

J. ShivakumarThailand Country DirectorThe World Bank

Tlhailand Social Monitor 2 Challengefor Social Reforot

This first issue of the Social Monitor attempts to summarize the evolution of the socialaspects of the crisis in Thailand. The Government's swift and effective response on thefinancial and corporate side of the crisis is widely acknowledged. Less recognized areThailand's early and substantial efforts !to address social impacts of the crisis. This efforthas been broad-based, incorporating government and civil society, through central and localgovernments, communities, academics, trade unions, firmns and enterprises, non-governmental organizations (NGOs), and Thai families themselves. The donor communityhas provided timely financial and analytilcal support to this broad effort.

To reflect both the diversity of social impacts and the wide range of responses, the SocialMonitor summarizes first the pre-crisis social conditions, then moves to the availableevidence on the social impacts of the crisis, followed by the actions taken to respond to thecrisis. A final section on pending policy questions sets out some of the many uncertaintiesthat remain concerning the impacts of the crisis and some of the difficult social policychoices that lie ahead for Thailand's leaders.

Thailand had not developed a comprehensive and dedicated set of social protection andanti-poverty programs before the crisis. There are several possible explanations: the manyyears of rapid economic growth lifted millions of Thai people out of poverty and eased theurgency of developing such programs; Thai traditions and values emphasize self-relianceand family responsibility; and such programs would have involved substantial burden onpublic expenditures and on government capacities.

When the social impacts of the crisis began to be felt in Thailand, the scope and depth ofthe income losses and unemployment called into question the adequacy of existing socialprotection programs to help vulnerable Thai families through the crisis. At the same time,the crisis focussed attention on what may be called the community-based, unofficialmechanisms for social protection. For example, would families be able to absorb laid-offrelatives in their enterprises and farms;Jinstead of lay-offs, would firms and labor agree toshare work and adjust wages; would loverseas and domestic remittances help distributeincomes to those in need; and would community- level social organizations take up socialprotection responsibilities?

Much of debate in Thailand on social protection centers on how far Government should goin developing publicly-funded or mandated social programs and on whether thespontaneous, unofficial mechanisms can be effective instruments in cushioning the blowsof the crisis, particularly on the poorest This kind of debate is heard elsewhere, but whatmakes Thailand's approach to social protection so distinctive is the determination tostrengthen the community-based, unofficial mechanisms as a complement to improving thesafety net and social insurance mechanisms that are found in higher income countriesaround the world. The Government is taking specific steps on both tracks.

This approach raises many vital questions, which are beginning to be subject to analysisand testing by the Government and its partners in civil society and the donor community.This and future issues of the Social Monitor will attempt to summarize the ongoing debateand report on the progress of the distinctive Thai approach.

Tlhailand Social Monitor 3 Challeiggefir Social Refrrnm

The framework used in this issue of the Social (unemployment and declining wages); priceMonitor thus presents the impacts of the crisis in the changes of key commodities; reductions in publicfollowing categories: falling demand for labor spending on social services; and erosion of socialcapital. Common to all the impact areas is the Security Schemes. Thailand's unique approachquestion of equity; that is which segments of Thai to the crisis warrants an additional responsesociety have been impacted more severely, the poor category, "Community Capacity Building"or the better off. referring to a wide array of initiatives from the

Government and civil society to helpThese impact categories are reflected in the response communities become more self-reliant andcategories discussed in Section IV: Employment flexible in adjusting to economic downturns, thatand Income Maintenance Programs; Protection and is to build up Thailand's social capital.Targeting of Public Expenditures; and Income

Thailand Social Monlitor 4 C(hallengefor Social Refirrn

FT Pre-Crisis: Social Attainments,=m.*;mQXie .Reformis

Spectacular growth led to impressive welfare gains

The exceptional performance of the Thai economy in the three decades prior to the mid-1990sis widely recognized. Between 1965 and 1980 growth averaged 7.3 percent annually,accelerating to 7.8 percent in the period 1980 to 1995 - nearly twice the growth rate of otherlow- and middle-income developing countries. Per capita income more than tripled.Thailand's economic management won international praise, and the country attracted largeinternational capital flows.

This rapid and sustained economic growth p roduced impressive achievements in people's well-being. Poverty declined dramatically in all regions of the country, irrespective of the particularlevel at which the poverty line is set. Using poverty estimates published by the NationalEconomic and Social Development Board! (NESDB) based on a head-count index, povertydeclined from one-third of the population'in 1988 to 23 percent in 1992 and finally to 11percent in 1996. During this period, the number of people living in poverty was more thanhalved - from 17.9 million to 6.8 million.

Public provision of social services widened. Substantial gains in life expectancy and declinesin infant mortality were achieved (see Table 1). Access to education, particularly at thesecondary level, expanded significantly and'the transition rate from primary to lower secondaryincreased from 47 percent in 1989 to 85 percent in 1994. The overall enrollment rate for lowersecondary doubled to 63 percent. The number of working children as well as their labor forceparticipation rates fell sharply from 37 percent in 1990 to 20 percent in 1993. The productivityof the poor and their employment opportunities increased enormously (World Bank estimates).

Table 1: Thailand's Social Indicators, 1970-95

Year

T _a ertitl:iWat

Secodar ne enolime, t

Source: World Bank Database

Thzailandi Social Monitor 5Challenge for Social Refiorin

Emerging vulnerabilities construction sector, but were not designed as jobcreation programs.

Widespread growth and prosperity, however,masked continued poverty in segments of Thai In the area of labor policy, the Thai government putsociety, rising inequality of incomes, and large gaps in place a severance pay requirement, which wasin the Government's social safety net. lengthened in August 1998 from six to ten months.

A workmen's compensation fund was alsoAlthough the decrease in poverty incidence was established with contributions from employers andseen throughout the country, poverty remains acute employees, and is functioning for workers in thein some areas and groups. In 1996, rural poverty formal sector. Minimum wage standards andcontributed 92 percent or nearly all of Thailand's various occupational and safety standards fortotal poverty problem. The North and Northeast workers were also promulgated. Prior to theaccounted for 77 percent of total poverty, with the outbreak of the crisis, there was no government-Northeast having the highest incidence of poverty sanctioned unemployment insurance program nor a(19 percent) and the highest concentration of poor government-sponsored social security scheme forpeople. The highest incidence of poverty (19 the private sector. Private provident funds werepercent) was found in households headed by available in some larger firms, but only civilfarmers, explaining much of the large urban/rural servants were enrolled in a government-sponsoredpoverty differentials. Children suffered higher- retirement scheme. Other social security benefitsthan-average poverty rates. Taking into account were available through the social security systemtheir relative population sizes, adults aged 25 to 59 for formal sector group players (health, maternity,years contributed the largest share to national funeral, etc.)poverty.

The Growing Reform AgendaDespite the impressive reductions in absolutepoverty, the benefits of growth were not shared In the years leading up to crisis, many currents ofequitably. As consistently as poverty fell between social reform were gaining momentum in Thailand.1988 and 1992, income distribution became more Civil society organizations and leaders pushed forskewed - dampening the rate at which poverty was political reform and government policies morereduced. Between 1988 and 1992, the share of responsive to the lower income and vulnerablepersonal incomes of the richest 10 percent of the groups. Their activities culminated in the draftingpopulation increased to 28 times that of the poorest of the Eighth National Economic and Socialdecile. In 1996 the Gini coefficient, a measure of Development Plan (1997-2001), widely regarded asincome inequality, was 0.50, well above the a seminal social reform document in Thailand. Inregional average for the current decade of .38 parallel, political reforms were introduced in thepercent (World Bank 1996). new Constitution which was promulgated just

months after the advent of the crisis in July 1997.During the period of consistent growth and povertyreduction, the Government took relatively modest The Eighth Plan was prepared by the Nationalsteps toward establishing an integrated social Economic and Social Development Boardprotection program. A set of social risk (NESDB), the Thai planning agency. A widelymanagement, social service and transfer programs consultative process was launched, seeking inputsserved as an ad hoc social safety net. Interventions from local communities and non-governmentalincluded: small-scale indigent and elderly grant organizations in the formulation of the Plan. Theprograms; national health insurance schemes for the result was a document focusing on the poor andpoor and near poor; national student loan programs under-privileged, and with initiatives designed tofor secondary students; targeted school lunch empower local communities throughprograms for primary school students; and short- decentralization of government, public participationterm vocational and technical training programs. in the Government's decision-making process,Various publicly-funded civil works and increased transparency and improved governance,rehabilitation projects provided employment in the

Thlailand Social Monitor 6 Challengefor Social Reforin

and the building of local capacities and self-reliance been promoted to encourage all concerned parties(see Box 1 for excerpts from the 8" Plan). including the public to participate in the planning

and decision making in each province. District andBox 1: 8 h ~~IT ~f~Jsub-district civic forums are also being encouraged.

FV3ev.el~opmenfP.laThe approach to community empowerment

The 8_' I~1ational Economic and Social II~evepnt embodied in the 8"' Plan borrows from theplans states th. t rapid economic gro:w.th hashd experience of the royal development projects tonegativ.e effe-¢ts on 1ilhsiic.ulture, tradi? ways of C'i'te, strengthen local communities and build local safetyfamily, communitybi 1j @S va1lues - .,dv.. op nets through community economic self-sufficiencybased only (s )M~t~ due programs. Under his Majesty the King's "Newonsiderationof human, my colnmunss ifland Theory" initiated in the early 1 990s, farmers

environmental dimensio- canno be sust~ined in the participating in a new form of land and agriculturallong run." The Plan envisioned a shif away from "themanagem ent seek to become self-sufficient andthe past" to "people-centered dev.elopment'Focus as repay debts. During the next stage of the projects,plaed on thedevelopment of humanresorces throu farmers form groups and create networks henceeducation health care and social wel, m equiable building up civil society.

cm ny l a & t Complementing the 8 th Plan's commitment toenvironment th'g~h 14 1 H i ii greater "people-centered development", the new

Constitution creates the framework for theintegrated in heglobal eonomybutould rema restructuring of national representative institutions

societywhere "ll peoplelearntolive together inan and reform of the electoral process. Drafted in theenlightene way, with mutual care foreachotthree years leading up to the crisis, the newhno e jtind Constitution introduces a number of new measures

to empower civil society and safeguard individualliberties. Along with the promotion of greater

Implementation of the 8h' Plan has been launched in political accountability and transparency, theseveral ways. The Plan calls for the coordination of Constitution emphasizes gender equality,government and non-governmental activities. environmental preservation, local resourceMonthly learning forums are being held at the management, community empowerment, and basicNESDB share local-level development experiences rights in education and health.and new initiatives. Provincial civic forums have

Tlhailand Social Monitor 7 Cliallengefor Social Refornm

"The true impact of the crisis comes less on the people in the financial sector, but rather onthe millions of people just near the poverty line. " James D. Wolfensohn, President of TheWorld Bank Group, during his visit to Thailand, Bangkok Post, February 1, 1998.

The onset of the East Asian financial and economic crisis began in Thailand in July 1997.After months of speculative attacks on the Thai currency, the baht was allowed to float oninternational currency markets, and there ensued a now very well-known series of events,including massive flight of capital, sharp depreciation of the Thai currency, growinginsolvency of financial institutions, and a relentless contraction of economic activity.

The sequence of events on the social side of the crisis is less visible and much harder todocument, but no less real. Three stages of social impacts may be hypothesized for laterstudy. A first stage, marked by the rapicllIy depreciating Thai currency through early 1998,was dominated by inflationary price increases and drought-induced shortages and price hikesfor agricultural commodities. There seem to have been some gains in the agriculture sector assome farmers exploited improved export opportunities and higher domestic prices for theiroutput. Government revenues fall precipitously, triggering several rounds of cuts in theFY1998 budget, including social programs.

In the second stage, beginning toward the end of 1997, the crisis impacts expanded to the realeconomy with sharp increases in lay-offs and a widespread and substantial drop in workerwages and incomes. In this stage, finance' companies closed and the construction industry,already in crisis, ground to a'halt. This phase may also have marked the acceleration of socialfabric problems, in the form of increasing drug trade and abuse, the first increases in schooldrop-outs, the taking up of illegal activities to replace lost incomes, and other social ills.

A third phase, in parallel with the increasing stabilization of the Thai economy and thebottoming out of the economic contraction may have set in during the second half of 1998 andinto 1999. In this last phase, layoffs and wage reductions have eased and public spending onsocial and economic programs has grown with encouragement and financial support fromdonors. Inflation has fallen to pre-crisis levels. There is also some evidence of the workingsof the unofficial safety net in Thai labor markets, both urban and rural, serving to cushion joblosses and distribute remaining wages and jobs more widely so as to avoid catastrophicimpacts on households. Social fabric problems persist, however, and possibly deepen,suggesting a "lag" between employment shocks and the erosion of social capital and familyvalues.

The available evidence on social impacts comes from both regular nationally representativelabor force and household surveys, as well as from more selective surveys of particular regionsand groups. In addition, in-depth participatory assessments have been undertaken, and theseprovide a more detailed picture of household and community-level conditions and copingstrategies. The following sections review some of the available evidence to provide an accountof the evolution of the crisis along the four main channels of social impacts:

* A fall in demand for labor and reductions in wages;* Increases in prices of key commodities, especially those that form a large part of the daily

requirements of the poor (rice, cooking oil, etc.);

Thailand Social Monitor 8 Challengefor Social Reforin

* Reductions in government spending on social unemployment had increased significantly from 2.0services and subsidy programs benefiting the percent in May 1996 to 5.0 percent in May 1998.poor and unemployed; and The number of seasonally inactive workers also

* Erosion of the social fabric. increased so that when added to the unemployedthis total increased from 6.5 percent in May 1996 to

In presenting social impact data, there is a risk of 11.2 percent in May 1998. Underemployment didattributing to the crisis long standing problems not increase in aggregate.caused by other factors. Problems such as drugabuse, crime, suicides, and domestic violence have By August 1998, the number of unemployed wasmany complex causes, only some which are 3.4 percent of the workforce. Some have used thiseconomic. Sorting out causation requires careful apparent "dip" in unemployment from 5.0 percenteconometric and social analysis. in May 1998 as evidence that the impact of the

crisis on employment lessened. However, adjustingFalling labor demand, migration and for seasonality, August - traditionally a time of low

wage declines unemployment due to seasonal demand for laborwage declines within agriculture for the planting of the main rice

Economic rcso,hcrop - saw the largest proportional increase inEconomic recession, the corporate crisis and unemployment since the onset of the crisis from 0.9contraction of credit have caused significant percent for the total labor force in August 1997 toincreases in unemployment, underemployment and 3.4 percent in August 1998. Underemploymentreal wage declines. The National Statistics Office increased only modestly from 2.2 percent in Augustpublishes tabulations of three rounds per year of the 1997 to 2.9 percent in August 1998. The increaseLabor Force Survey (LFS). After summarizing in underemployment evident in February 1998 wasresults of the LFS for employment, wages and apparently a transitional phenomenon. By Augustmigration, the Social Monitor reviews the 1998, the employmnent effect of the crisis wasinteresting results of econometric analysis of LFS primarily on overt unemployment (see Figure 1).data. Because employment exhibits a strongseasonal component, LFS results are compared year At a regional level, the largest initial increase into year. unemployment after the advent of the crisis

occurred in the rural areas and the Northeast region,Employment and Underemployment where concentration of poverty is highest.

According to the February 1998 LFS, ruralAccording to the February 1998 round of the LFS, unemployment roughly doubled from 0.5 million inthe first to capture employment impacts of the February 1997 to 1.04 million in 1998. Thecrisis, the total number of unemployed more than absolute increase in the rate of unemployment wasdoubled from almost 700,000 (2.2 percent of the the largest in the rural Northeast (3.5 percent inlabor force) in February 1997 to 1.48 millionpeople February 1997 to 8.2 percent in February 1998).(4.6 percent) in February 1998. Measured The increase in measured underemployment wasunderemployment (defined as persons working greatest in Bangkok (0.3 percent in February 1997from one to 20 hours per week) showed an even to 12 percent in February 1998). By August 1998,greater increase, from 544,000 (1.7 percent) in the overall unemployment rate was highest in urbanFebruary 1997 to 1.48 million (4.6 percent) in areas. Unemployment was concentrated in theFebruary 1998.' Bangkok metropolitan area (4.6 percent of the

workforce) and the Northeast (3.6 percent). Of theDue to budget constraints, no survey was conducted total number of unemployed, almost 40 percentin May 1997. However, compared to May 1996, were located in the Northeast region.

Underemployment rates are calculated at different-thresholds of hours worked per week. Recent NESDBcompilation which defines underemployed at thoseworking under 35 hours per week shows considerablylower numbers for underemployed, particularly for theFebruary 1998 LFS round.

Tliailand Social Monitor 9 Challengefor Social Reforin

terms by close to six percent across all workerFigure 1: Thailand's Unemployment and categories identified in the LFS.

Underemployment: Feb. and Aug. 1996-1998This decline in average real wages was greater in

5 4X 4.6 ' urban areas, at 8.3 percent, than in rural areas, at 4.743 * 34 percent. At the aggregate level, the decline in real2 3. * 29 wages was about the same for males and females,as 2. 2 21 IJ 2'21.7 but in urban areas the decline in female real wages[2I ] | lexceeded that for males, while the reverse applied

INN 1-E lEE | Id- in rural areas. Thus, at an aggregate level the male-F,b Ag FRb A.g ib A .& female earnings disparity remained virtually

6996 699 I7 IW97 199 6996

unchanged, but it increased in urban areas and| Unemployment EUnderemployment | declined in rural areas.

In urban areas, average female wages actually fellSource: Labor Force Survey

National Statistical Office In money terms by 1.6 percent, implying a declmeNESDB Estimates in real wages of 10.5 percent. This decline in

female wages in urban areas was especiallysignificant in the manufacturing sector, where

Migration money wages for females fell by four percent andreal wages fell by around 13 percent. In the urban

Migration is a critical issue for understanding labor sector construction, a very large decline in malemarket flexibility and remittances and for targeting money wages occurred (15 percent), implying anthe unemployed. Data on migration are incomplete. average decline in real wages for males in thatExiting unemployment and underemployment sector of 24 percent. Overall, real wage declinesfigures suggest hypotheses for crisis impacts on for males were largest in the urban construction andlabor migration. The initial impact of the crisis the rural services sectors, while for females theyseems to have occurred in urban areas and caused were largest in urban manufacturing and in rurallarge numbers of workers to be laid-off in the small-scale trading.construction and in the manufacturing and servicessectors. The urban contraction may have induced Analytical Perspectivestwo distinct labor market responses: the reversemigration of unemployed people from urban to The NESDB, with the support of the ADB, hasrural areas, increasing the number of rural carried out sophisticated econometric analysis ofunemployed; and an increase in urban the LFS data sets. The most recent paper producedunderemployment as some of the newly laid-off by the NESDB team (N. Kakwani and J. Pothong,workers found part-time work in the cities. By "Impact of Economic Crisis on the Standard ofAugust 1998, it appears that the rural, economy Living in Thailand", Development Evaluationcould not support the large number of returnees. Division, NESDB, January 1999) examines LFSUnable to find employment in the rural areas, it data from 1992 to 1998 and is able to estimate anseems that many returned to urban centers in search index of crisis impacts compared toof work. . "counterfactual" trend growth rates in employment

and other indicators in the absence of the crisis.Wages Also informative is the use of analytical tools to

measure the relative impact on standard of livingDeclining wages in Thailand have had a more from unemployment, underemployment andsubstantial impact on welfare than pure declines in wages. Seasonality of the data set isunemployment. The impact of the crisis on wages also addressed. Some of the many valuablemay be assessed by comparing the February 1997 findings from this rich analysis are summarizedand February 1998 Labor Force Survey results. below. All estimates of impacts are in relation toOver this period, average money wages fell in real the expected trend in the absence of the crisis:

Thlailand Social Alonitor 1C Ch7allengefor Social Reform

* The crisis has hit the poor hardest, significantly The floating of the baht in July 1997 set off rapidreducing employment and real wages of people price increases of imported goods and pushedwith education equal to or below the primary domestically produced goods toward the exportlevel, on the assumption that primary education market. Between July 1997 and the fall of 1998,attainment is highly correlated with low prices of all commodities were rising faster thanincomes (see Figure 2). they had prior to the crisis. Overall inflation

* The agricultural sector has played an important jumped from 4.4 percent in June 1997 to a peak ofrole in cushioning crisis impacts as employment 10.7 percent in June 1998. The price of food andhas shifted from the informal non-farm sector to beverages increased by 10.2 percent in the first tenthe informal farm sector. months of 1998 over the same period in 1997. The

* The crisis has hit small and medium enterprises price of electricity, fuel and water rose by morehardest, many of which were forced to close. than 18 percent in the first half of 1998 compared toBusinesses employing less than five people the first half of 1997. The VAT was increased byhave contributed a reduction in employment of three percentage points to ten percent.19.6 percent, while those employing betweensix and ten people have contributed a 24.5 The depreciating exchange rate as well as increasedpercent reduction. In the third quarter of 1998, demand due to the effects on other countries of thethe impact spread to medium-sized enterprises. El Nino-induced drought caused the price of riceSimilarly, the impact of the crisis on real wages and other agricultural products to increase sharply.is also most severe among small and,medium- By February 1998, there was anecdotal evidencesized enterprises. from households that the price of rice had increased

* The crisis has had a severe impact on real by over 60 percent. Net producers of agriculturalincome per earner through the reduction in products are affected differently by price increases.work hours and hourly productivity. The Agricultural households who produce more thanmagnitudes of real income reductions are they consume - about 25 percent of the Thaihighest in rural areas, particularly in the population - saw an increase in their net earnings,Northeast. although a part of the earnings were off-set by

* The crisis has contributed to a larger increase in higher input costs (S. Gupta, et.al, 1998).the unemployment rate among males comparedto females. The prices of pharmaceuticals and other medical

supplies were also significantly affected by thesharp depreciation of the baht. The Health Systems

Figure 2: Impact of economic crisis on real income Research Institute reports that by November 1997,(i.d-) per earner by education the price of domestically produced drugs rose by at

S.0 L tlb.. Ekl!DbMy Se-ond.ry VssIdoa uw-nity T-h- least 12 to 15 percent and the price of imported0.0 _ prnt__ising drugs by 18 to 20 percent NGO networks.5.0 l l 1 l l ll1 expressed concern that the treatment of HIV/AIDs

.10.0 patients, heavily dependent on imported drugs, may-0 .14ii 9 4.0 be seriously affected.. With higher medical costs

.25.0-_ .:1.0 2 1 and lower incomes, people's demand - particularlyJ30.0 -21, 30.1 -28.5 -24.7 -263 for those less able to pay for the out-of-pocket costJS5.0 30 1of medical care - is likely to drop. Evidence

indicates a shift to public sector care, postponement1st quarte" 1998 §3rd quarter 18 of medical attention and self-medication. The

deteriorating health of vulnerable groups may notSource: Kakwani and Pothong, 1998 be immediately evident. But demands for particular

health services are increasing as a result of thePrice changes crisis. More patients are reporting stress-related

ailments and the incidence of depression andThe living standards of low-income households suicide rates are reportedly risinghave also been seriously affected by price increases. (Thanjarenrnsatien and Lertsataindamrong).

Tliailand Social .4onitor 11 Cliallengeefor Social Reform

By October 1998, the exchange rate had stabilized were comparatively under-funded to start with andand domestic demand had contracted. Prices in have fewer non-budgetary sources of income fromOctober rose at an annual rate of only about six to which to draw. NGOs also report a significantseven percent, a pace comparable to pre-crisis price decrease in their ability to provide social services,increases. In November and December, the particularly in health-related fields (The Brookersuppressed demand and the strengthening of the Group, 1998).baht led to prices actually falling on a month-on-month basis. For example, the price of rice and The Ministry of Health budget cuts werecereals fell by 2.3 percent form October to concentrated on capital projects so as to avoid cutsNovember while the price of vegetables and fruits in operating costs of vital services. However, thedeclined by 3.9 percent. This reduction in the HIV/AIDS program, according to a paper presentedinflation rate, it can safely be assumed, has eased at the World AIDS Conference last year, hasthe crisis impacts on low-income consumers, but endured substantial cuts to certain programs in thefood producers in Thailand, as many have early rounds of budget reduction in FY98. Withinpredicted, may suffer due to falling prices. the MOH, the free condom distribution program,

antiretroviral drugs, vertical transmission program,Reduction in public spending and drugs for opportunistic infections were reported

to be cut. The NGO grant program for care ofAs part of its fiscal adjustment, Thailand undertook AIDS patients, the breast milk replacementa series of budget cuts in the first phase of the crisis. program, and the blood screening program wereIn FY97, the initial budget of baht 984 billion was protected. How these programs were dealt withcut by 6 percent. This reduction was followed by subsequently in the last round of FY98 budgetcuts in the FY98 budget totaling 152 billion for a restoration and in the FY99 budget and itsfinal budget of baht 830 billion. The appropriation adjustments has yet to be analyzed (Pothisiri, et.al.,for education declined by- 9.0 percent and public 1998).health by 15.2 percent over the FY98 budgetsubmitted to Parliament in the month prior to the A UNICEF survey of 46 elementary, loweronset of the crisis. Although guidelines used in secondary and secondary schools in the North andmaking the cuts included preserving those' aimed to Northeastern regions focus groups was conductedlessen the social impact of the crisis and education with community members to determine the impactand health expenditures, they did not include any of the financial crisis on children. It reported thatexplicit poverty-related criteria. The FY 1999 the largest number of dropouts occurred at the gradebudget overall is less than a one percent reduction 7 and grade 10 transition points (see Box 2). Morefrom the previous year, and there are plans to generally, the study revealed weaknesses in studentsubstantially increase spending on social programs monitoring systems. At the elementary and lowerto stimulate the economy, create jobs, and improve secondary school levels, widespread teacherservices. indebtedness was seen as reducing the time teachers

can devote to schools instead of second jobs.An Asian Development Bank review conducted in Concerns were also raised that past policies ofearly 1998 found that cuts in the government targeting key inputs, such as school lunch and milkbudgets for education and health and delays in subsidies, may need to be adjusted to include moredisbursing approved funds inevitably affected a students as the crisis continues and deepensnumber of programs and created challenges for (Mehrotra, 1998).public sector institutions. In both sectors, therehave been significant shifts from private to publicsector providers as people seek to reduceexpenditures. As a result, public schools and healthfacilities are strained, and private institutions arestruggling to survive. There have been seriousconcerns about the effect the lack of funds will haveon the ability to maintain quality of services. Ruralschools appear to be more severely affected as they

Thlailand Social Monitor 12 Challengefor Social Reform

Box 2: I~ act onK Sho-oI Attendance cards at a modest charge that entitle the family toreceive a package of free health services at public

en fm Incomes due to the crisis could be facilities. Enrollments have grown rapidly in recente |pected to reduce f~illy ability and willingness to years. It was anticipated that the program mightshoulder the costs of keeping children in school. falter during the crisis due to the fee charged, but a

ifolifiiilitheMinistryof E tion .substantial increase was recorded in Card sales as,iME ad a special strdy oducte Aby U1NIIj . .windicates that attendance has fallen. Althou the apparently, many Thai families are tuming to publicaggregate numbero-fstu-dents leavin-g school in the first from private facilities (see Figure 3). The scheme isyear of the cnsis are low compared to other affected encountering difficulties in financing services for

thepatternd slarwmsom new enrollees, as the inadequate budget subsidy forthe program must now be distributed over an ever

A lage sareof te dopous arlevingthesystma larger patient base.th cuiali transitio poins tolo.wer and up,perecondar

grade-to-grade drop-outs declined at almost all I vels. In Figur e 3: Thailand's Health Card Program:1998, however, all transition, drot res rose 199641998

_=em Mn il 25D0 IYYd n s a m i0 j f6rkease0Wi 20194 *1997.

.1S5

The rtlkIyrs sma inreaseint pouCt r-atesrn ayAbe IDD Wt

0-~ ~ ~ ~ ~~~~~~~~~~ Z NOosaiiiiS 5 ~~~~~~~~~~~~~~ID * SA

9 2- s T ~~~~~~~~~N o6bermse .outpatit Vft Inpatmt voisi

advantage of=this defocto scholarship. lih rn0rLe fo~al Source: Ministry of Health

suppooftheA haveenounteredadministative Erosion of social capital

30,000 students have bene ited from prLogram capable of The economic downtum is reverberating through toassisting at least 200 000 per year.. the social fabric of the country. Although the data

0! M57 %Ep (39 D MaiTi'a is largely anecdotal, there are many reports of gainsThe aiiiiR i enln in social capital, that is increased trust, reciprocity

subject of a special 1999 study conducted by the and functioning of social networks. At the sametn D Cwf time, other reports document the many cases of

ASEM-EtU Trust Fund administered by_ the World B~k.familial breakdown and the erosion of traditionalThai values. It is difficult to ascertain the impact of

Source : Ministry of Education; Mehrotra, 0998 the crisis on these events, but there is widespreadrecognition that economic hardship is adding to

The Ministry of Health has recei ied financing from both trends.the World Bank and the ADB tc sustain its level ofservices to low income patient at the provincial A village-level study conducted by the Internationallevel. Preliminary patient utili 7ation rates do not Fund for Agricultural Development found thatshow dramatic overall increases '8 percent increase family and community networks are helping toin FY 98 for outpatient visits' in provincial and cushion some of the affects of the crisis. Returningregional hospitals, for example) perhaps reflecting migrants with no immediate relatives are beingdecisions to put off care-or self n1 edicate. IThere are taken in by extended family or local temples, whichreports, however, that some programs are over- are supported by the community. Employment insubscribed and under-funded, such as the voluntary non-farm enterprises is being rationed to maximizeHealth Card Scheme. This program offers health the number of people benefiting. Farmers are

Tlhailand Social Monitor 13 ChYallengefur Social Reforin

ottermg loans to tnends and relatives. .iroup loans informed observers attribute part of the cause toare reportedly being repaid ahead of individual economic hardship. Crime rates are rising and theloans, even in cases where additional high interest crisis has reinforced the drug trade as an easy andloans are necessary to repay the group obligation. safe way to earn money (see Box 3). Many ThaiThese accounts suggest social gains at the group experts on social issues regard this erosion of sociallevel (Nathan, et.al., 1998). values as a serious threat to the long-standing

cohesion of Thai society.

Box 3:l __phetamines~ An Escalating SocialCrisis impacts on poverty and inequality

Althughit cnno bediretlyattrbutd t thecriis,The social impacts of the crisis can also be analyzedthe umber of drug addicts and abusers has surged in through changes in poverty and inequality, as

the ast ears wih amhetaine -or"sped"-measured by household consumption and incomes.<pping th list according to the 2ffe of the NarcoticsPreliminary estimates of poverty incidence andControl Board (®N=Bj'. MorE than half of al{l druginequality by the Development Evaluation Division

user ar tenagrs.®utof 570~ hared ith~igof NESDB with ADB assistance (N. Kakwani), areoffeces n 197 -a almst 0 pecentincrase romavailable for the first two quarters of 1998 from the

E 9~- 73,880 involved |phc~mincs. Production of Social and Economic Survey (SES). They indicatenWmphetamines are_ a fact of lp~e in every communitythat the long-term trend of declining poverty and

recent reductions in income inequality have beenof all ages, oupations and social groups... The spreadinterrupted. Since 1996, poverty incidence,-ofE the drug in recent years has been phenomenal and measured by a head-count index, has increased bythet authorities admit they ar struggling to deal with aapproximately 1.5 percent to 12.7 percent indicatingtroblemPthat is out of contrl, in the first half of this that about I million Thai people have been pushedjear, f =9r =ample, drug abuse tops the list of criminal below the poverty line (see Figure 4). As the data

are available only for the first half of 1998, it doesnot capture the acceleration of income declines

Bangkok Post, ~ecmbr , 99. owmuh f herecorded in the second half of the year.

ly complex iu u FD_iguume4'TbhaIand. Povety ndW0ee 19 8- 199 l

l t_ l ~~~~~~~~~~~~~~~~~~~~~~~35 32l

lm d by the fast money. They just think worse30 272

worse_ they will have to go7to jail.They have3032

Ban kk P1p, J~n~ 10 1999.D 6.= il,5 111 1ll | 163 '13 w~~~~1512.

As the crisis endures, and wages and job lossesmount, there is evidence that families are turning to 5

damaging coping mechanisms and breakdowns in 0ocohesion. Focus group discussions in February | LqlE Isso 1992 1994 1996 19981998 revealed increased conflicts within families,among households, and in society more generally. Source: NESDB

The number of street children, abandoned byfamilies hard hit by the crisis, more than tripled Changes in poverty incidence varied considerablybetween 1997 and 1998 (Yue and Bhanu, 1998). by region. In Bangkok and the vicinity, povertyThe crisis appears to have led to increased school incidence is low and increased only slightly, fromdrop outs, child labor, child prostitution and child 0.6 percent in 1996 to 0.75 percent in 1998. In thebeggars. Business failures have affected mental Northern region, poverty incidence actually fell,well-being. According to government estimates, the from 11.1 percent in 1996 to 9.3 percent in 1998, assuicide rate more than doubled in I998 and it did in the Western region. Moderate increases

Thlailand Social Mlonitor 14 Challengefor Social Reforin

occurred in the Central and Eastern regions, but the The SES data reveal a small increase in inequalitylargest increases in poverty incidence occurred in and reduced income share for the poor. The Ginithe Northeast and Southern regions, where it coefficient increased from .50 in 1996 to .506 in theincreased from 19.3 percent to 22.7 percent and first two quarters of 1998. The income share of thefrom 11.4 percent to 15.6 percent, respectively. richest quintile increased from 55.3 percent in 1996The increase in poverty incidence was greatest in to 56.2 percent in the first two quarters of 1998.rural Thailand where it increased from 14.9 percent The income shares of all other quintiles declined.in 1996 to 16.9 percent in 1998. The comparableincrease in urban poverty incidence was from 3.8percent to 4.4 percent. As rural areas representmore than half of the Thai population, thesenumbers indicate that in the first half of 1998 theabsolute increase in the numbers of people inpoverty was much larger in rural than urban areas.

Thlailand Social Monitor 15 Challengefor Social Reformn

"In these dificult times as we focus 6n the immediate tasks of economic recovery, theneed for adequate social safety nets - to protect the unemployed, the poor and themarginalized - assumes even greater urgency. But it would be a terrible disservice anddemeaning to our peoples if we think of social safety nets solely in terms of handouts. Forreal human security -the real social safety net - is human development, holistic humandevelopment. Intelligence and equal; access to opportunities are the best insuranceagainst future calamities. Helping them to help themselves constitute the most importantinvestment that we can make for our own future and shall help enable us to emerge fromthe present crisis on to the path of stronger, more disciplined and sustained growth."H.E. Dr. Surin Pitsuwan, Minister of I Foreign Affairs, in a speech at "An IntellectualDialogue on Building Asia's Tomorrow", Japan, December 2, 1998.

Policy Response of the Governmnent

In the months after the crisis hit, the Thai government took several decisions whichsignaled the priority accorded the social reform agenda. First, the Parliament proceededwith passage of the new Constitution! which, as noted above, introduced far-reachingreforms to the political system. Second, in February 1998, Government endorsedrevisions to the 8'h National Economic and Social Development Plan to better respond tothe crisis through the following three major guidelines:

1. Minimizing the effects from rising unemployment through measures to alleviateunemployment in urban areas and promote employment generation in the rural areasto absorb returning migrants;

2. Assisting the underprivileged groups of people and those affected by the crisisthrough assistance measures in the areas of social welfare, education and health;

3. Preventing and alleviating social problems, especially drug use and crimes, as well aspromoting commendable social values.

The third decision, also at the policy level, was made by Prime Minister Chuan Leekpai inJuly 1998 as he established a new National Social Policy Committee (NPSC) in responseto public demand for increased coordination of social policy and attention to the socialreform agenda. Chaired by the Prime Minister, the widely-representative NPSCcomprises the ministers responsible for social issues, NGO representatives, members ofpeople's organization, business persons, academicians and a religious leader. Apartnership among the public, non-governmental and private sectors to formulate andmonitor social policies is believed to be key to solving the country's social problems.

After the depreciation of the baht and ensuing economic crisis, the Government requestedassistance from the international financial community. The response, led by theInternational Monetary Fund, was a package of loans totaling US$17.2 billion as well asan increase of grant resources. Most of this package was aimed at stabilizing the volatilecurrency markets, calming foreign creditors, and restoring confidence. A substantialportion of the package, however, was dedicated to addressing social impacts.

The main Government and donor-supported investments were aimed at providing socialprotection for the unemployed and vulnerable and can be grouped into four major areas:

7'hailand Social Montitor 17 Challengefir Social Reformn

(i) employment and income maintenance; (ii) the public domain, this Government with its civilprotection and targeting of public expenditures; (iii) society partners has pursued an innovative secondincome security schemes; and (iv) community track designed to build an unofficial socialcapacity-building. The scope of the effort has protection network, through empoweringinvolved almost every government ministry, and a communities and developing social capital. It iswide array of initiatives down to the operational far too early to measure any outcomes from thislevel. It is not possible to recognize in this brief second track, but the reform agenda has certainlysummary all of the important government actors been enriched by the initiative.and efforts.

The safety net and the larger social protection Employment and Income Maintenanceframework in Thailand contains many gaps in Programsinstruments and coverage. On the eve of the crisis,Thailand's social protection system did not include During the first few months of the crisis in 1997,several instruments common in OECD and Eastern the Government became increasingly concernedEuropean countries, such as unemployment with reports of lay-offs, not only in the financialinsurance, a pension scheme for the private sector, ecobut also in construction and services. Asand large scale transfer programs for the poor, such the contraction of the economy accelerated, theas food stamps, transfer entitlements for the Government approached international donorindigent, andmso forth. agencies (the Asian Development Bank, the

World Bank and the Overseas EconomicThe onset of the crisis has been a period of intense Cooperation Fund of Japan) for financing in twoscrutiny of the existing gaps in the social protection areas: job creation and budget support for vitalframework and debate over how to address them. services benefiting the poor and unemployed.As will be seen in the following sections, the The first loan came from the ADB in the form ofGovernment has strengthened aspects of the public an emergency Social Sector Program Loan,sector safety net, such as the severance pay which provided balance of payments and budgetrequirements and the social security scheme, and it support aimed at improving health, education,has vigorously pursued employment generation and and employment services (see Box 5).training as ways to assist those with job and incomelosses. The second loan package was the Social

Investment Project, financed by the World Bank,The Government has not, however, launched an the Overseas Economic Cooperation Fund ofunemployment insurance scheme or expanded its Japan (OECF), the Australian Agency forsmall-scale transfer programs for the indigent. International Development (AusAID), and theThere are concerns about permanent entitlements, United Nations Development Program (UNDP).fiscal burdens, and untimely taxes on labor and The Project financed expansions of selectedemployers. Beyond those reasons are more deeply Government programs to create jobs and providefelt views on how best to restore the damaged services to the poor and unemployed. Thesocial fabric and strengthen self-reliance. The Project also financed a new Social InvestmentPrime Minister and his cabinet, leading civil society Fund to support community capacity-buildingthinkers, and of course the views of H.M. the King, and an Urban Development Fund to provideshare a determination to restore traditional Thai infrastructure loans to municipalities.values of self-reliance and self-help and an equally International donors are considering follow upstrong desire not to undermine such values in loans to further support the Government's effortssociety. in employment generation and the establishment

of a more comprehensive social protectionThis view has helped precipitate long-pending systeri.reforms and initiatives to build up the capacity ofcommunities and families to help themselves and The Government took other steps to address theeach other. Thus, in addition to the vital unemployment problem as it became clear fromimprovements to the official safety net programs in various sources that the incomes of the poor and

Thailand Social AMonitor 1 Challeuige for Social Rcyi)rny

near poor were declining. The Ministry of Labor employment; loans for employment promotionand Social Welfare, for example, in cooperation and the establishment of an employmentwith relevant ministries formulated an Action Plan information system. With assistance under thefor the Alleviation of Unemployment Problems. It Asian Development Bank's Social Sectorset forth seven measures to address the impacts of Program Loan, the Ministry of Labor and Socialthe crisis, including: immigrant labor; Welfare has launched Centers for Assistance toencouragement of Thai workers abroad; Laid-off Workers - a one-stop service center toemployment generation in rural areas; training for help laid-off workers in the areas of severancethe unemployed; and employment preservation pay, social security, placement and counselingthrough support to labor-intensive and export services, training and low interest loans. Theindustries. subsidy for urban bus and rail fares is being

maintained to protect urban low-income workers.Financed through a combination of budgetallocations and loans from the World Bank,. the The International Labor Organization (ILO) isOECF of Japan and Asian Development Bank, the working with Government, workers' andgovernment initiated temporary, labor-intensive employers' organizations to develop andcivil works programs in both rural and urban areas implement a package of responses which cover aconsistent with regional unemployment and poverty range of activities relating to employmentpattems. These works include: school repair; road, generation, wage policy, protection of child labor,small dam and weir construction; rural industrial industrial relations, social protection,promotion; rehabilitation and expansion of small- occupational safety and health and smallscale irrigation projects; improvements of basic enterprise development.infrastructure benefiting the tourist industry; and avillage center development project which will Protection and Targeting of Publicemploy new labor market entrant volunteers (see ExpendituresBox 4).

:Box4:u~iE~E ~ an jandiEm j~ ~mETTIRMener A second pillar of the government's socialne. _vemmentsem protection efforts has been the protection of

close 111wtJasE@F,whichas lng social sector expenditures during the period ofexperience in Thailandis transp agricultureland toulsm -.; fiscal restraint and the targeting of publicly-

sectors, i suppor f l n sllw financed programs to those least able to pay.ir B an' SocialInvestmnt With the adoption more recently of a fiscal

Prot as a ofinnier, lin e S stimulus package under the most recent Letter ofmillion lastWyeatcesonal intWes Intent with the International Monetary Fund, the

renhailitatilon f e w majority of new investment will be allocated tocompon were n t m social protection.

ao-obrdinns =m

agencs t ipementthese smallscale w Although in the year following the crisis overall

generated by these two componentsIn a h F budget appropriations for social services declinedprovided finEg abot US illion) for local cost as noted earlier, allocations to key programs

fprojects so as to accelerate targeted to the most vulnerable groups wereof these ®F~F financed operations. ~i~E@F maintained or increased. Scholarship and loan

suppor for the ~Iovemmcnt social program is set toprograms to minimize student dropouts wereUp- ur,theriwithfi ingarc tei ainitiii e. expanded and, combined with the commitment of

Thai families to education, have helped explain

In addition to civil works projects, employment the relatively low increase in dropout rates. Theinitiatives also focus on: the expansion number of children receiving school meals

of vocational and skills training programs for the increased. Operational budgets for teacherof vocational and skills training programs for the training and instructional materials wereunemployed and new labor market entrants;

occupational and income, generating promotion; protected.foreign worker supervision; promotion of overseas

71tailand Social Mlonitor 19 Challengeftr Social R&Jbrn

Financing for the Public Assistance Scheme (low- schemes. Such savings or tax-based socialincome health card) was increased and coverage insurance programs pose a dilemma for policyexpanded in response to the substantial increase of makers, due to the contractionary impact of newenrollments in the program. Maternal and child taxes or additional savings in the midst ofhealth activities are also protected. Immunization substantial economic downturn.and prevention programs are being extended.Health staff are being redeployed to rural areas. Thailand relies on unemployment assistanceResponsibility for resource management is being benefits, notably severance pay requirements, asdecentralized to universities and vocational schools opposed to an unemployment insurance scheme.with increased powers to provinces and Prior to August 1998, employers were required tomunicipalities. pay laid-off workers with a minimum of three

years service a severance equal to six months ofThe increases in planned spending in the current wages. As of August 1998 and as a result of thefiscal year will be allocated heavily towards social crisis, the maximum severance pay requirementexpenditures. In addition to job training and labor- for employees with more than ten years of serviceintensive projects, the budgetary allocation to the was increased from six to ten months. The extentsecondary education loan program will be increased to which severance requirements are beingwhich will supplement the ADB-financed primary implemented during the crisis is open to question.education projects. The school lunch program will Government is establishing a publicbe expanded significantly. Opportunities for the compensation fund to ensure that workersunemployed to become entrepreneurs though dismissed from firms facing bankruptcy receiveexpanded small loan facilities and training adequate cash severance support. This fund willprograms will be strengthened (see Box 5). be financed by fines imposed for violation of the

Labor Protection Act. In addition, a Workman'sBB-~ox 5: .VAI]D~B [Soc-i7al Se7-t7or Pgro ra -MILoan-9 Compensation Fund reduces risks of income loss

for workers in the formal sector. EmployersA E'S$-500 mi_lion the Social Sector Program Loan ~SSPL) is alone contribute to the Fund. In 1996, the Fund's

[ loanVever p total contributions exceeded total claimsp,&enmBank A Apime at both mitigatingth ayments (McCleary et.al., 1998).

Zimm;ediaesocial impacts of the crisis and implementing\ y,.atr-ctralfo<Sithe prject Efocuses on thr.e-eare-as: lab.oraand

cialwRelfarre, o lt ie spp Thailand's social security system is entering auniderthe SS-P include:a schlarship fund tokeepusome period of rapid change. Formerly, pension200 000 vulnerable nmaz and secondar studentsin sch¢ool benefits were available only to civil servants,

voluntaryhealthcareholdaers bht1 2 billio awhile some larger firms offered provident funds.extensonof heath disability, deathandmaternitybenefits for Other benefits (medical, maternity, invalidity and

funeral), but not pension, were extended to firmsand their employees with at least ten employees.

force data establishing a comm As a result of the crisis, the Government extendedm fordisa-dvantaged preshoolers iurban a a social security benefits, for the unemployed from

provisioniof lunch and m ik todisadvantaged preschool six to 12 months and reduced the tripartitechildren in child develo ment centers Activities to address contribution rate for such benefits by one-third.u wks w

bureaucracy_ and incresedtauto rc vn t Late last year a more far-reaching change to thesocial security system was implemented,

Income Security Schemes establishing pension and child allowance schemesfor private sector employees. Due to the crisisand hardships on employers and workers, theAs traditional family and community-level coping implementation plan will phase in the full

mechanisms have been straice by the crisis and contribution rates over several years, so as towith incomes so sharply reduced, much discussion minimize the contractionary impact of the newhas centered on the adequacy of existing system. Questions remain about the long-termunemployment assistance benefits and pension financial viability of the scheme, given the

Tlhailtand Social Alonzitor 20 Challenge fr Social Refrrni

mandated benefits and contribution rates. A child Committee (SPC) has created the Pattana Thaiallowance scheme uses general government Foundation to channel over baht 40 million inrevenues to finance benefits for children of only government funds to: (i) conduct pilot projects toenrolled families, a relatively well-off group (IMF support local communities to established civicand World Bank estimates). forums in every province; (ii) set up community

learning centers for social services andHowever, this is a major step in the development of sustainable development and (iii) planning,the social security system and the realignment of an monitoring and evaluation. The SPC hashistoric social commitment for Thailand. The contracted the Local Development Institute, aAsian Development Bank will provide substantial Thai NGO, to coordinate the implementation oftechnical support during this critical early phase of these activities by a large number of partners inimplementation of the pension scheme. civil society. In September 1998, Government,

with the assistance of the World Bank, UNDP,Community Capacity Building and AusAID, launched a new initiative in this

area, the Social Investment Fund which provides"If you don't have a strong community, anything grants to community-based organizations to

you do will be set to fail. No matter how much the undertake investments designed and implementedgovernment or authorities might try to help, by the community (see Box 6).nothing will be accomplished. But with a strongcommunity, coupled with government support, you _- % Soc Ma In M GM -

can foster development which can stand on itsown." Phra Subin Panito, the spiritual leader of eoe.er.theBaan Pret, Bangkok Post, January 11, 1999. an

Inr! 13Are~2'ierade ap~ n o hi~heriinA critical and innovative element of Thailand's o mmIT -u n p dtresponse to the social impacts of the crisis is d tprIAeL by,rengthnIngsupport for decentralization and community The SIF amdevelopment as articulated in the 8h Plan. At the ru org Sithton a nrtspolicy and program levels, the Government has tI on tirt th1 iaboeviewed the crisis as an opportunity to advance E-ri in or Ereforms towards decentralization, better 3reltrandNrS dgovernance, community empowennent and the dinenen attd Eronnne aforging of broad development partnerships with r8 ains-ryannparentcivil society. This innovative approach is aimed at nt t nom enx iionmentalrebuilding and consolidating social capital eroded Cn|j lhTeornmunni iherby economic growth and to strengthen the i Mandunofficial, community-based "safety net." m en ur n t s !

that appro~ed _roictir implemented a-cLring- toIn addition to their successful advocacy efforts, stanard a i eak dl'oesources kimainttz=d 'ndcivil society organizations have played an . are reli.increasingly important role n providing socialprotection at the community level. The Thai Under the Thailand-United Nations Collaborativegovernment as well as donors have allocated an Action Plan (Thai-UNCAP), numerous Unitedincreasing proportion of their budgets to civil Nations agencies, including the UNDP, UNICEF,society organizations to implement programs and the Food and Agriculture Organization haveincluding HIV/AIDs prevention and treatment, care undertaken commnunity-led activities in pilotof the elderly, small and mediwm enterprise areas with special attention to crisis impacts.development, and environmental protection. Several bilateral donors have grant programs

which fund community-based activities, such asIn response to the crisis, many new community- AusAid's Small Activities Scheme, the Canadianlevel initiatives have been supported by International Development Agency's CanadaGovernment as well as donors. The Social Policy Fund and New Zealand's Small Projects Fund.

TlIailanid Social M11oniitor 21 Challengelor Social Relorm;

This first issue of the Social Monitor has touched upon many social aspects of the crisis,but it is by no means a complete compilation. Some sources were not available or located;and many impacts and responses to the crisis are only beginning to emerge, and have yetto be measured or analyzed. In particular, the Government's bold initiative to invest incommunity-based unofficial social protection mechanisms raises many questions on therole, scope, and effectiveness of existing mechanisms as they operated at the village level,in social groups, and in labor markets before the crisis. Also unknown is how effectivelysuch unofficial mechanisms have responded during the crisis. Are the widely distributeddeclines in wages and employment an indication of success or failure of the unofficial,community mechanisms? And finally, the Government will want to know how well itsfirst round of initiatives has worked in building up community capacities.

Underlying this discussion is the dilemma faced by policy makers around the world:should the Government spend scarce tax revenues on public programs that only serve todisplace resources and mechanisms at the local, community, private and unofficial level?Here in Thailand, the question is enriched by the issue of values and social reform. Manyreformers in Thai society view this question in terms of restoring parts of the social fabricdamaged during the years of rapid growth and reversing the deterioration of socialbehaviors and values, in particular personal values of hard work, honesty, mutual support,and self-reliance.

Donors from developed countries come to these questions with experience in socialprotection systems that are managed, mandated or financed by the Government. Suchprograms have responded to large social constituencies found in the highly industrializedsocieties. Thailand and its leaders argue for a selective, Thailand-specific approach,building up, even during the crisis, such instruments as severance pay requirements and apublic pension scheme, but postponing others, such as unemployment insurance andtransfer programs. As Thailand pursues its two-track strategy for social protection,investing in both official and unofficial mechanisms, there is a growing opportunity formutual learning and new forms of development support between Thailand and the donorcommunity.

A number of other issues for further analysis and debate have emerged from the workalready done and summarized in the Social Monitor:

* Unmet demand for microcredit services, now much discussed in Thailand, needs to beanalyzed and options explored for support to this potential avenue of strengtheningcommunity-based solutions;

* The question of migration and its links to remittances and labor markets needs furtheranalysis to better understand how labor markets and inter-familial transfers may becushioning the effects of the crisis, and to better target employment services;

* Poverty analysis and program targeting in Thailand now will have a new set ofchallenges as a result of the crisis, as the framework for analysis has shifted from oneof sustained high growth to a more volatile and uncertain environment, and the profileof the poor has shifted, probably substantially;

Tlhailanzd Social AMontitor 22 ChallengeftrSocial Reorni

* Opportunities for social reform in the public, * The full story of budget outcomes and theirofficial sector are far from exhausted in significance will be an important chapter inThailand, and a rich agenda awaits policy understanding the Government's management ofmakers in such areas as refinements of the resources and program protection; the role ofsocial security system, rationalization of donor financing in financing the protection ofGovernment health insurance programs, "core" social programs and services will also bedevelopment of more agile and targeted public important in the story.employment schemes such as workfare, and * Employment generation and other emergencyoptions for savings-based or insurance-based investment programs mounted by theunemployment programs. These options will Government will need to be monitored andbenefit from careful debate, intemational evaluated carefully, as there are surely lessons forexperience, and analysis of the potential the'Government and donors in the performance ofdemand for and effects of such mechanisms; key projects and programs that were expanded or

* Phasing of the social impacts of the crisis is launched during the crisis.partly known and can be further developed so * Reliable and timely data on employment, wages,that other countries may benefit frorm the Thai incomes, migration and social capital is essential,example; and Thailand's sources can be improved and

* Erosion of social capital and values is a expanded.compelling topic which will benefit from

* further participatory social research and fromquantitative analysis, separating out crisiseffects from other causes, and introducing aset of comparable and reliable indicators:

Thailand Social Monzitor 23 Challengefir Social Remrr

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