Bangkok’s fiscal bias fans Thai political angst

December 2, 2013

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Thailand’s turmoil has its roots in extreme inequality. The most recent protests – the latest in an ongoing political crisis – is at least partly a reflection of a deeper chasm worsened by a biased fiscal policy.

About 70 percent of government spending occurs in urban, industrialized Bangkok. Meanwhile, the rural Northeast, home to a third of the nation’s 70 million people, gets a paltry 6 percent, according to a World Bank analysis of public expenditure in 2010.

This imbalance breeds resentment against the “Bangkok elite” – a sentiment exploited by Thaksin Shinawatra. A proposal to grant the convicted former prime minister amnesty angered the opposition Democrats and triggered the recent protests against his sister’s government.

It’s still unclear if Yingluck Shinawatra will survive the attempt to topple her. The army, which ousted Thaksin in 2006, has not taken sides this time. That could change if the military decides the besieged Yingluck is unable to govern. A larger question, though, is whether Thailand, which suffers such eruptions with an infuriating regularity, has a shot at longer-term political stability.

Yingluck’s answer has been to correct one imbalance with another: In her two years in power, she has thrown more than $18 billion at buying rice crops from farmers at above-market rates. Spending the equivalent of 10 percent of Thailand’s annual government revenue is not sustainable. It is also not a solution to what the Northeast, which is half the size of Germany, needs. The region suffers from a 17-to-1 disadvantage to Bangkok in per capita annual healthcare expenditure. When it comes to education spending, it gets less than a fourth as much as the capital city.

The World Bank has recommended consolidating local administrative units to make them more viable. Creating fewer, bigger local government agencies, should give them more autonomy over spending decisions. But technical improvements may help only up to a point. It will take strong political leadership to make the Bangkok elite accept a smaller share of a growing resource pie. Thaksin’s regime blew the opportunity by becoming mired in corruption scandals. Whatever the outcome of the latest protests, they offer little hope of a longer-term resolution.

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