Poverty in Thailand & Improving Diagnostics

1. Poverty in Thailand & Improving Diagnostics Somchai JitsuchonThailand Development Research InstituteSustainable Growth, Regional Balance, & Social Development for Poverty Reduction in ThailandNESDB-WBBangkok, 26October 2006

2. Outline 1. Overview of Thailand’s Poverty 2. Poverty Policy Formulation • Fundamental Changes of Policy Architects • National vs. Area-based Policy 3. Poverty Diagnostics Tools • Poverty Data • Small Area Estimation Poverty Map

3. Thailand’s Poverty Overview

4. Poverty Trend Thailand’s Poverty Declined Rapidly over the Past 40-50 Years If using old definition (before 2004), head-count ratio would be only around 5%

5. But Income Inequality Remains High..One of the World’ Highest

6. Consequences on Target Groups • Destitute poor (absolute poverty) has been dwindling in number, but some pockets of chronic poverty might exist. • Relative poverty increasingly important • stubborn to economic growth, if inequality persists. • began to dominate public debates/policies. More ‘poverty measures’ are devised for the relative poor, not the poorest. • Problems of vulnerability also increasingly important, but still largely neglected. • Rural and urban poverty more linked than in the past, due to convergence of economic activities.

7. Poverty Policy Formulation

8. Changes in Poverty Policy Architects In the past • national poverty policy either did not exist, or was an unsubstantial part of ‘National Plan’. Poverty declined mainly through growth process. • Technocrats were thus key (and sole) architects of poverty policy at national level. • Politicians mostly influenced sectoral policies, or minor area-specific policies.

9. Changes in Poverty Policy Architects Present • Poverty policy was nationalized by the TRT party around the year 2000-1, along with global interest in poverty reduction. Political success of TRT party was partly due to this shift. • ‘National Plan’ now plays very little role, along with its technocrat architects. Poverty policy was basically transferred to politicians’ hands. • Consequently, most poverty policies are now more targeting, more sectoral. One exception is the universal health care scheme.

10. National vs. Area-based • Most of the time (past or present), all major poverty policies are centrally conceptualized and implemented by central government’s bureaucratic arms. • However, there has been attempt to decentralized implementations to ‘local governments’. • For example, provinces are granted more power (financial and bureaucratic). More room for local initiatives. But most of local efforts is still devoted to carry national poverty policies designed by national politicians.

11. Consequences • The current policy quickly favors the relative poor, rather than the absolute poor (except the universal health care). • There is urgent need for reliable poverty data at disaggregated areas level (at least at provincial level). • Also urgent need for high frequency poverty data (at least annually), to support the ‘Poverty Eradication within 3 years’ agenda by TRT party leader.

12. Poverty Diagnostic Tools

13. Poverty Data • Household Surveys on Consumption/Income • Census (pop census, agricultural census, industrial census) • Administration Records • Participatory Reports • Hybrids

14. Thailand’s Poverty Data A. Use household surveys (SESs) alone. • OK at national/regional level • but inadequate for true area-based policy implementations (e.g. SESs produce zero poverty in many provinces). B. Rural Village Data: Nrd2C and BMN (basic minimum need) • Ad hoc ‘poverty line’ • composite index (monetary & non-monetary), with ad hoc formula C. Poverty Registration (TRT party initiative) • completely self-report

15. Mis-targeting Problem of Poverty Registration If not complimented by other data sources,71.6% of poor people will be neglected.

16. Comparing 2000 SAE Map with 1999 Nrd2C ‘Map’ • The two maps are significantly different. Either (or both) may have the problem of including the wrong villages as well as excluding the right villages. Which one?.

17. SAE Poverty Map • Simple Idea: Get estimates of household income/consumption on large dataset (usually Census) based on models built on household surveys (SESs). • SESs have both (Y,X) but Census has only X. • The models also allow for ‘location effects’ • Advantages: • Combine Census’s Large Coverage with SESs’ Reliability. • Esitmated Y’s enable many applications (poverty, inequality, social security). • Limitations: • Only monetary definition of poverty. • Census is every 10 years (may use other dataset---BMN). • Huge data work, complicated econometric procedures.

18. SAE Poverty Maps in Thailand • First Map in 2000 (Joint project NESDB/NSO/WB/TDRI) • Use household survey 2000, Census 2000, and village survey 1999 (provides location variables for rural map) • Second Map in 2002 (Join project NSO/NESDB/WB/TDRI) • household survey 2002, Census 2000, and village survey 2002 • Third Map in 2004 (on-going effort)

19. Field Validation • Why Validation? • Survey Sampling Errors • Model Error • Omitted Variable problem • Inconsistency between SAE and Nrd2C • Three Field Validations • (1) Nakhon Sri Thammarat province (South) to verify SAE 2000 Map • (2) Three provinces of Pitsanulok (north), Nonbualumpoo (northeast), Ratchaburi (central), to verify SAE 2002 Map. • (3) Roi Et, Surin, Tak, Maehongson, to verify 2004 Map.

20. Central District Pitsanulok (head-count at sub-district level) • Poverty rates varied considerably • Some sub-districts were clearly better-off (Pai Khodon, Baan Grang).

21. Baan Grang: Group Interview (farmers) Baan Grang was clearly a better-off sub-district, supporting SAE results

22. Preliminary Evaluation of SAE method • SAE Poverty Map is fairly accurate in predicting poverty ranking by area. • SAE can benefit from improvement in the accuracy of surveyed income/consumption. • Need to simplify the method (underway), and overcome the theoretical and empirical issues of poverty map updating.

23. SAE Applications • Applications so far • Limited applications at national level. • More potential at provincial level, mostly through NSO’ provincial offices. • Some CEO governors showed interest in using SAE maps. • Future Plan • More Promotion to Line Ministries. • Collaborate Ministry of Interior in linking to Nrd2C, BMN. • Nrd2C/BMN can be used as data sources for ‘location variables’ in producing future SAE map.