BANGKOK Urban problems addressed.Web site: http://www.tfb.co.th/tfrc95/jul/3july.htm

Urgent Issues for the New GovernmentThai Farmers Research Center July 4, 1995.

The following is a summary of the urgent problems the Thai government has had to address as a result of very rapid urbanisation in Bangkok since 1995.

1. The Traffic Problem The traffic problem in Bangkok has been getting worse and worse as the average distant per hour is now only 8-9 kilometres on a busy street of the inner city and could get even worse to 3-4 kilometres in a heavily congested condition, comparing to an international average of 25 kilometres per hour in a city. There are various kinds of costs as a result of the traffic problem; for example, more gasoline consumption, time spent idly in vehicles, health problems-especially those related to the respiratory system, mental stress, and social and family life deterioration, etc. It is estimated that each day, there are about 1.5 million cars travelling in and out of Bangkok. Traffic congestion causes vehicles to spend more time on streets. I.e., we find that a vehicle would probably spend on average about 91 minutes in travelling from an outskirts area to the inner part of Bangkok as opposed to only 48 minutes when there is no traffic problem. Travelling through the congested traffic condition results in 39.6 million-baht-per-day gasoline consumption or 12.36 billion baht per year. Traffic congestion also takes more time out of a daily life. As a result, there is a hidden opportunity cost, as one has to spend hours of a day on streets in Bangkok. This opportunity cost can be as high as 74.5 billion baht a year in total under an extreme assumption that all of the wasted time could have been put to work and resulted in income for the individuals stuck in the traffic jam. For a more moderate estimation, however, we find that it would probably cost 37.26 billion baht a year if half of the wasted time in the traffic could have been put to work and generated earnings. Another cost from the traffic problem is the health-care expenditure related to respiratory illness and mental stress. It is estimated that about 9.5 billion baht a year is spent for the treatment of the sickness caused by the trafficrelated problem. The total cost from the traffic problem could be moderately estimated as high as 59.13 billion baht a year. In other words, it is estimated that a driver in Bangkok is probably losing 28.44 baht per day from this horrendous traffic congestion.

Solutions: To lessen the severity of the traffic problem, it is recommended that more roads, streets, and hi-ways should be built to accommodate the increasing number of vehicles in the Metropolitan area. Car owners should be able to find mass transportation systems as appealing alternatives. A kind of traffic zone should be considered and may be developed. Finally, strong incentives should be provided for people to work and live in the same area, and children should go to schools located in the same zone with their houses.

2. The Income Distribution Problem Even though Thailand has experienced strong economic growth in recent years, income inequality has been worsened continually. While people who were in the top 20 per cent income group used to own 54.9 per cent of the country's total income in 1988, they owned as much as 59.4 per cent in 1992. On the other hand, people in the bottom 20 per cent income group used to own 4.5 per cent from the total in 1988. In 1992, they owned only 3.8 per cent. It is believed that the income distribution problem is related to the lack of development in the agriculture sector of the country.

Solutions:

Among policy recommendations for a better income distribution are: reduction of debts for farmers, modernisation of farming techniques, better distribution and marketing systems for agricultural produces, and a proper land distribution policy for poor farmers.

3. Reengineering of the Thai Public Office System To better accommodate the fast pace of economic and social changes led mostly by the private sector, the Thai public sector now needs to modernise the way it works. Innovative ideas that cut the tax payers' waiting time and costs are so much needed. The reengineering process may require uses of technology including computer and office automation systems for better public services. Moreover, approval processes and hierarchy structures within government organisations that have to be in contact with and provide services to the general public should be shortened. In other words cut the unnecessary red tape!

4. Deadlocks of Mega Infrastructure Projects

Some of the country's huge infrastructure investment projects have been going no where as problems have been constantly cropping up. In particular, transit projects such as the Mass Rapid Transit and the Bangkok Transit System have been initiated since 1991; however, only the Bangkok Transit System is now under construction while the Mass Rapid Transit is put under a halt by a legal dispute between the government and the project owner. The restructuring and privatisation of the Thai Marine Time Navigation is also suffering a setback, as it is not clear who the major shareholders of the company would be. The Second National Airline has also been put on a halt after the parliament dissolution and is now pending the new government's policy. The liberalisation of the Air Cargo services is now under a feasibility study of possible joint ventures including the Thai Airways. Finally, the 1.9-million-telephone-line project of which privileges have already been granted to two telecommunication companies might also suffer a delay as the contracts will be likely to undergo a review by the new government. The new government is urged to handle each mega project as transparent and efficient as possible. On the other hand, an unnecessary delay will only hamper the country's development and investment potential.

6. The Pollution Problem As Bangkok and the Metropolitan area becomes more and more congested, pollution seems to be more evident. Pollution problems can now be spotted in other big cities throughout the country. Water pollution is caused mainly by waste water from city residents, factories, fertilizer and pesticide used in farming, and trash from city residences. Air and noise pollution is caused mainly by vehicles and the traffic problem in the Metropolitan area as well as factories nearby.

Solutions:

Policy recommendations are as follows: strict pollution monitoring, providing incentive for factories to install a waste treatment system, promotion of recycling used materials, reduction of uses of chemical in farming, and promoting public awareness of environment issues.

7. The Labour and Human Resource Problem An urgent concern is that Thailand is still behind nearby countries such as Malaysia and Singapore in terms of labour and human resource development.

Solution:

To be able to grasp the ever-increasing technology trend in the modern industrial development, Thailand would need a more skilled and educated labour force. The new government should draw up an aggressive strategy tackling the human resource and skilled-labour shortage problems. Training as well as education programs for existing labour forces will probably improve the productivity of the labours. Moreover, producing enough number of highly-skilled professionals such as engineers should be on the top priority of the country's education system.

8. Challenge from International Competition In a multilateral platform, international trade has become a more complicated issue. Bargaining and negotiation with various different counterparts is usual as the country is striving to attain its best benefit in the international arena. The new government should appoint a group of authoritative professionals with awareness and vision in a broad range of international issues to represent the country in such official meetings. Moreover, we recommend that measures should be set out to improve the overall competitiveness of the country's exporting sector. New export markets should be searched out. And the country should be able to develop its own research and technology for future domestic industrial uses.

Solutions:

9. The Current Account Deficit Problem

(Foreign Debt)

Solutions:

The current account deficit has risen to 213.7 billion baht in 1994 comparing to only 9.66 billion baht in 1987. Chronic trade deficit and lower surplus in the service account are the main reasons behind the increase in the current account deficit. The surge in the out-bound travel and the increasing deficit in transportation, insurance, royalties and license fees worsen the service account considerably.

Export promotion and improvement in the service account are needed for reducing the deficit. In particular, promotion of in-bound tourism, development of a national marine fleet, and increase in the labour income from abroad are among the policy recommendations aiming to improve the service account.

10. Investment PromotionThe new government needs to quickly clarify its investment promotion policy.

Solutions:

Recommended measures are as follows: distributing investment promotion to provinces, preparing basic infrastructure in the provinces, providing incentives for local investors to take part in such a promotion plan, developing the country's infrastructure and services necessary for industrial activities, tackling the traffic problem in the industrial areas, developing supporting and linkage industries, controlling industrial pollution, solving the labour shortage problem in manufacturing, actively promoting the country's investment promotion policy in foreign countries, setting up priority industries for investment promotion, providing financial support as a part of a promotion, and developing the country's own research and technology for domestic industrial uses.

11. The Industry Development ProblemDomestic industries and manufacturing are now facing problems related to: congestion of cities, traffic problems, pollution, lack of sufficient infrastructure, and, most importantly, a labour shortage. Moreover, economic development in countries like China, India, and Vietnam with relatively more abundant labour supply has made labour-intensive industries relocate their investment and plants to such countries. Thailand, therefore, needs to find its own comparative advantage edge in international markets.

Solutions:Perhaps, a solution lies with a transformation from labour-intensive manufacturing to technology-intensive industries that are less reliant on cheap labour forces. The policy recommendations are as follows: a reform on the tariff structure providing more competitive edge to the domestic industries that still need to import capital goods and raw materials from abroad, the development of Thailand's own research and technology, product design development,

implementation of aggressive new marketing strategies, development of supporting and basic industries, and labour and human resource development.

12. The Problems of Tourist IndustryTo boost the domestic tourist industry, the following recommendations are made: First, the co-ordination between the Tourist Authority of Thailand and the private sector in the industry in solving some chronic problems such as unfair practices toward foreign tourists, pollution at the tourist sites, crimes against foreign tourists, etc. Second, the development of competent personnel in the hospitality industry. Third, provision of sufficient infrastructure and basic services in tourist cities. Fourth, development and promotion of new domestic tourist attractions. Fifth, Cupertino with neighbour countries in developing and promoting crossregion or cross-country tourist packages. Finally, promotion plans aiming for specific target groups with specific interest and high purchasing power.

13. The Problems in the Agriculture SectorThe agriculture sector has been considered as quite far behind other sectors in the country's growth and development. From 1992 to 1995, while the average income per capita outside the agriculture sector is around 173,710 baht per year, the average income of those in the agriculture sector is only 14,523 baht per year. Moreover, while the country as a whole is expected to be able to enjoy an average growth rate of 7 to 8 per cent per annum during 1992 and 1996, the agriculture sector's growth rate is forecaster to be only 2.8 per cent. The worst part is that as much as 60 per cent of the country's population is in the agriculture sector, so the problems seem to be affecting the majority of the country's population, who now seem to be migrating to other sectors. Main problems in the agriculture sector are: low yields in various kinds of crop comparing to those of Thailand's main competitors such as China or the US., lack of proper land ownership among farmers, and heavy debt burdens.

Solutions:Among major policy recommendations are: establishment of the Nation Agriculture Council which will co-ordinate the efforts from the government and the farmers in solving agricultural problems, establishment of commodity-future markets, and

development of irrigation and water supply systems.