Linkages between Planning and Budgeting in Thailand

1. Linkages between Planning and Budgeting in Thailand By Ms. OrachornKerdpibule Macroeconomic Strategy and Planning Office Office Of National Economic and Social Development Board (NESDB), Thailand June 18,2012

2. Scope of Presentation • Basic information • Planning at the General Government Level • Budgeting at the central and local level • Lessons learned and conclusions

3. Basic information Historically, • Thailand as unitary form of government with highly centralized planning and budgeting processes with centralized agencies delivering economic and social services throughout the country. Before the 2007 Constitution: • The 1997 Constitution changed the centralized form of government by “autonomy to the locality”1 through the 1999 Decentralization Act which transfer some functions from the central government to Local Administrative Organizations (LAOs) and assigning of general government revenues to LAOs 1(1997 Constitution Chapter IX Section 282)

4. Basic information Present (after the 2007 Constitution) • In 2003 a Royal Decree on Good Governance was promulgated setting out the different planning requirements by the central government and local administrative organizations in order to make agencies more responsive to local needs and be more accountable to citizens. • In 2008 a Royal Decree on Integrated Administration of Provinces and Provincial Clusters was promulgated which required provinces to prepare provincial development plans and for government agencies to align their interventions to support these provincial development plans.

5. Status: planning and budgeting Main responsibilities for planning and budgeting at the central government level: four key economic agencies; • National Economic and Social Development Board (NESDB)setting medium and long term national plans; the five-year National Economic and Social Development Plan (NDP). • Bureau of Budget (BOB) for budget formulation, execution and monitoring process including annual budget strategy. • Ministry of Finance (MOF) by Fiscal Policy Office (FPO) in collaboration with revenue collection agencies to provide revenue projections and proposes the fiscal framework. • Bank of Thailand (BOT) participates in the pre-budget formulation discussions with the BOB, MOF, NESDB where respective agencies present their projections on macro-fiscal aggregates within their power.

6. Planning at the General Government Level Central government • The five-year National Economic and Social Development Plan (NDP) (currently in the 11th Plan covering FY 2012-2016) sets the overall framework for national development the next five years. • The Government Policy Statement sets out the key policy objectives of the elected government over a 4 year period, preparation of which is the responsibility of the Cabinet Office. The linkage between the Government Policy Statement and the five-year National Plan is not legally mandated. Rather, creating this linkage is entirely dependent on the policy agenda of a new elected government, which may have different policy priorities than those listed in the NDP.

7. Planning at the General Government Level Central government (cont.) • The Government Administrative Plan (GAP) is the statement of medium term policiesincluding objectives, the agency or entities responsible for each mission and the related estimated income and expenditure estimates, the proposed results monitoring and evaluation measures. • In principle, the GAP is by design a government tool to direct public administration over the four year term of government, while the NDP can be viewed as a tool for policy coordination among different parties including private sector and civil society. • The Prime Minister Office’s regulation determines the constitution of committees to review and update the country’s development status and to collect data and information necessary to prepare the GAP. • Country’s development update committee chaired by NESDB comprising of BOB, CGD, FPO, BOT, the Secretariat of Cabinet Office and National Security Council. Information collection committee chaired by Cabinet Secretary, Council of State, NESDB, OPDC.

8. Planning at the General Government Level Local Administrative Organizations(LAOs) Local Administrative Organizations is required to prepare both a three-year development plan and a long term strategic development vision. • The long term strategic development plan is required to be consistent with the five-year National Development Plan, the Government Administrative Plan, Provincial/ District Development Strategy and the Community Development Plan. The LAOs development plan is expected to present the respective LAO’s vision, mission and development goals, as an implementation tool. No matter the size or capacity of the LAO, such planning documents are legally mandated. • The three-year development plan is a progressive plan, which essentially presents strategies, programs and projects to be implemented in each of the following three years, which includes; (i) LAO’s general social and economic background; (ii) Qualitative and quantitative assessment of the previous year performance; (iii) Prioritized strategies and developmental guidelines in the next 3 years; (iv) Lists of programs/projects in accordance with strategies and guidelines; (v) performance monitoring and evaluation

9. Figure 1: Schematic Representation of Planning Processes in Thailand Prepared by Frederico Gil Sander, NattapornTriratanasirikul, Robert Boothe, and Shabih Ali Mohib (World Bank) Local level Government Policy statement National Economic and Social Development Plan (5 years) Government Administrative Plan (4 years) Government Policy Integrated provincial strategic plan (Area based) Policy from ministries and departments (Functional based) Ministries and departments (Functional based) (function based) Provinces and provincial clusters (Area based) Government Operation Plan (4 years) Province and provincial cluster development plan Annual Budget Allocation Strategy Integrated district strategic plan (Area based) Annual province and provincial Operation Plan Annual Government Operation Plan Annual budget request Local strategic development plan Annual budget 3 year local development plan Annual budget

10. Budgeting at the Central and Local Level Central Government • Bureau of the Budget (BOB) translate all of the different plans into the annual budget and executes this responsibility through a framework of Strategic Performance Based Budgeting (SPBB – adopted since 2003),which SPBB in Thailand is to improve the link between the budget and the various development plans and operational plans prepared by agencies. • The budgeting process is systematic with a clear budget calendar. The budget process has the following stages: budget revision, budget planning, budget formulation and budget adoption, and requires one year of preparation

11. Budgeting at the Central and Local Level Central Government (Cont.) • The budget planning process involves core economic agenciesagreeing on key macroeconomic assumptions, aggregate revenue projection, public debt forecast and annual budget expenditure with three years of forward projections. • BOB and NESDB also prepare an annual budget allocation strategy which sets out the strategic targets, KPI’s at the macro level and a budget allocation guideline. These KPI’s are included in each of the agencies’ annual operating plan and reviewed at the end of the year.

12. Budgeting at the Central and Local Level Local Administrative Organizations (LAOs) • The local budgeting system is undergoing a transition, from line item incremental budgeting to a more programmatic focused one, which are currently classified by economic classification, current and capital expenditures. • Current expenditure consists of (i) salary and wages for permanent staffs, (ii) wages for temporary staffs, (iii) compensation/ services and supplies, (iv) utilities, (v) grants and (vi) others. • Capital expenditure comprises durable goods, land and installations • Central budget allocation (representing approximately 30 percent of total expenditures) is maintained by the Office of Chief Administrator for discretionary use. General grants and other sources of funds that are incorporated into budget expenditure are also classified by economic classification.

13. Lessons learned and conclusions • Thailand has well established planning mechanisms across government, the process of reconciling the various development plans with the Government Administrative Plan (and the cascading operating plans) could be significantly improved. • Multiple plans overload the budget allocation processes as the overall budget is split or fragmented into many different ‘sources’, impairing the ability of the Government to find and fund large integrated projects and sometimes resulting in overlapping or similar projects each being funded simultaneously. • The absence of a formal annual budget strategy and non-communication of indicative ceilings from BOB to agencies early in the budget preparation cycle leads agencies to practice unconstrained budgeting.

14. Thank you orachorn@nesdb.go.th