although Bangkok accounts for about 17 percent of population and 25.8 percent of GDP, it benefits from about 72.2 percent of total expenditures. This is in sharp contrast to the Northeast which accounts for about 34 percent of population and 11.5 percent of GDP, but received only 5.8 percent of expenditures. Even correcting for the fact that Bangkok is the administrative capital for the country, such concentration of expenditures is extreme.
Service delivery disparities mirror expenditure disparities. In the health sector there are three times more doctors per capita in Bangkok than in other regions. While in the education sector the teacher per student ratio is much lower in the North and the Northeast than Bangkok and the central region. These disparities are correlated to human development outcomes. Analysis points to two main reasons for the observed concentration of expenditures:
(i) momentum of expenditures – concentration of economic activity requiring concentration of investments in infrastructure and education and health facilities in the Bangkok and the central region. Now these need to be maintained, leading for little fiscal space for other expenditures; and (ii) the equalization component of the intergovernmental fiscal transfer system is very small – out of total grants from central government to the local government of TBH 174 billion, a mere 3.7 billion were set aside for equalization purposes in 2011.
As Thailand continues to develop, production will probably continue to be concentrated in Bangkok and the central region. The key policy challenge however will be on making access to public services more uniform across the country – both in terms of quantity and quality. In order to accomplish this task the Government could consider:
Refocusing expenditure policy towards regions that are deficient in terms of service delivery, with the aim of bringing them up to the Bangkok standard; and
Increasing the equalization element of the intergovernmental fiscal transfer formula from 2 percent to at least 15-20 percent of total transfers