Asian and African Area Studies, 11 (2): 166-182, 2012

Thaksin and Budget Allocation: A Study in Political Compromise
Kriangchai Pungprawat *Abstract
As a strong executive, Thaksin Shinawatra brought many changes to Thai politics andpublic administration, including to budget allocation. This article explains how theThaksin government procured funds to implement many ‘populist’ policies. Before Thaksin,budget allocation was dominated by the bureaucracy. Initially, Thaksin attempted to reformthe system by removing the prerogative over budget allocation from the bureaucracy.
This effort, however, failed due to resistance from the Bureau of the Budget. As aresult, budget allocation came to rest upon compromise between government leaders
and the Bureau of the Budget. Almost all funds for Thaksin’s policies came from theCentral Fund and revolving fund within the existing budgeting system. This article also
shows that budget allocation under Thaksin did not damage Thailand’s public finances.

Introduction
Thaksin Shinawatra, prime minister of Thailand from 2001 to 2006, is considered one of the mostpowerful leaders in Thai history. Scholars have coined such expressions as Thaksinocracy [Rangsan
2005: 1], Thaksinomics [Rangsan 2005: 13-14] and Thaksinization [McCargo and Ukrist 2005] todescribe the unique political circumstances of the Thaksin administration. There has, however, been
no serious analysis of budget allocation under Thaksin. An interesting question remains: How did
the Thaksin government exercise the power over budgeting needed to implement its many ‘populist’
policies? This study marks a first attempt to gauge the relationship between political transformation
and budget allocation under Thaksin.
During the 2001 election campaign, the Thai Rak Thai Party announced an ambitious policy
platform. It did not however, clarify how it would finance its proposals. This invited criticism that
Thai Rak Thai policies were fanciful and mere propaganda intended to win the rural vote [Somboon
2000: 16]. After the formation of the Thaksin government, however, almost all campaign pledges
became official policy, and they were effectively implemented within one year. Part 1 of this article
describes the origins and scope of Thaksin government policies.
When the Thaksin administration took office, it had to follow the same fiscal rules as* Graduate School, Kasem Bundit University
Accepted September 20, 2011

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PUNGPRAWAT: Thaksin and Budget Allocation

the previous government.1） It faced, moreover, two important obstacles: the framework of fiscal
discipline and the departmental-based character of budget allocation.
On the one hand, the Thai Rak Thai Party’s policies were very new and required a large budget.
On the other hand, fiscal rules placed strict limits on budget deficits.
The departmental-based system of budget allocation derives partly from the character of public
administration in Thailand, in which every department has its own juristic person status. The
department, rather than the ministry, is the budget unit and receives its funding directly from thegovernment. Consequently, the annual budget is determined in a bottom-up fashion, and the sizeof the budget is based on demands from each department. The Thaksin government had to decide
which department would be responsible for each policy, since these policies were based on agendas,
not functions.
A department’s budget, moreover, consists mainly of current expenditures. Between the 1999
and 2006 fiscal years, current expenditures, on average, accounted for 73.2% of the total budget.2）
Although the remaining 30% was intended for capital expenditures, it was mainly allocated fordurable goods, acquisition of land, and construction. As a result, annual budgets tended to be
unresponsive to political initiatives.
In response to these challenges, the Thaksin government pursued two important reforms. First,
it transformed the budget system, discussed in Part 2 of this article. Second, it created new methods
for budget allocation, discussed in Part 3 below.
Thai scholars have criticized the Thaksin government for a lack of fiscal discipline [Rangsan
2005: 26], for placing public finances at risk3）[Weerasak 2004] and for increasing the national debt
[Pasuk and Baker 2004: 130-131]. Pridiyathorn Devakul, Finance Minister after Thaksin’s deposal,
blamed the former prime minister for reckless spending and huge debts in various government
agencies [Bangkok Post, February 4, 2007]. The spending created a staggering 150 billion Baht ofbad debt that required half of the successor government budget to clear [Bangkok Post, February 4,2007]. Did the Thaksin government really damage Thailand’s public finances? Part 4 of this article
will assess the effects of budget allocation on the national budget under Thaksin.

1. Origins and Scope of Thaksin Government Policies
The Thaksin government was the first in Thai history to deliver on its dramatic campaign promises.
1）Interview with Mr. Pisit Lee-Atham, former Deputy Minister of Finance, March 11, 2008.
2）Calculated by the author from figures in Thailand’s Budget in Brief for various years.
3）Weerasak does not, however, offer any evidence of damage to public finances caused by the Thaksin government.

167

Asian and African Area Studies, 11 (2)Its platform consisted of three rural programs: an agrarian debt moratorium, a revolving fund of one
million Baht for every village, and a 30 Baht-per-Visit Healthcare Plan. These marked refinements ofa National Agenda earlier proclaimed by the Thai Rak Thai Party [Pasuk and Baker 2004: 81-82].
The effective realization of these policies marked a significant departure in Thai politics.
Following the September 1992 election, for example, the leading member of a new coalition, theDemocrat Party, failed to deliver on its promise to arrange the provincial governorship election
because its policies differed from those of the coalition government [Rangsan 1995: 87-89].
By contrast, the Thaksin government kept its promises because of new election rules. The 1997
Constitution changed multiple-member constituencies to a mixture of single-member constituencies
and a proportional representation system.

This made policies more important than candidate

celebrity in determining electoral victory. Thaksin was well aware of the rising significance of policy.
In establishing the Thai Rak Thai Party, he expected the party platform to become the blueprint forsolving the nation’s problems [Walya 1999: 227].
In the 2001 general election, Thai Rak Thai was the only party to differentiate its policies fromthose of other parties. This helped garner 11,634,495 votes—40.6% of the total—whereas thesecond place Democrat Party obtained only 7,610,789 votes, or 26.6% of the total.4） During the2005 general election, the Thai Rak Thai Party continued making popular pledges, and other parties
attempted to imitate them. The Mahachon Party, for example, stressed advanced social welfare
policies, and the Democrat Party promoted free education.
Pasuk and Baker argue that Thaksin worked rapidly on his election promises to court
popularity before the Constitutional Court decided on his asset declaration case [Pasuk and Baker
2004: 98]. The better explanation, however, is that Thaksin wanted to maintain voter support.5）
Following a not guilty verdict from the court, Thaksin announced that he would seek a second fouryear term [Pasuk and Baker 2004: 96], this time endeavoring to win an absolute majority. He hoped
his party would gain 400 seats in the House of Representatives. The target for the Northeast was set
at 130 out of a total 138 seats [McCargo and Ukrist 2005: 85].
In the exhibition “Jak rak yar soo rak keaw,” 6） held in 2004 to highlight Thaksin’s achievements, the government outlined ninety policies [Committee editing the annual report on results of
the implementation of fundamental state policies 2004]. As Table 1 shows, ten of these cost more
4）Election results as announced by the Election Commission on February 2, 2001. For more details, see [Office of theElection Commission of Thailand 2001].
5）Interview with Mr. Suranand Vejjajiva, former Minister of the Office of the Prime Minister, November 14, 2008.
6）“Jak rak yar soo rak keaw,” literally means that the roots of grass become the taproots of a tree. It suggests thatThaksin government policies will bring quality of life (the taproots of a tree) to the poor (the roots of grass).

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PUNGPRAWAT: Thaksin and Budget Allocation

Table 1. Budget Allocated for Thaksin Policies
Unit: Million Baht
Policies
1. 30 Baht-per-Visit Healthcare Plan
2. Debt Moratorium for Farmers
3. Scholarship Essay Competition and One Amphur One
Scholarship
4. Housing for the Poor
5. Inheritance Pension
6. Peoples’ Bank
7. Securitization
8. Small-Medium-Large Village Development Fund
9. Suvarnabhumi Airport
10. Village and Urban Community Fund

Period of Policy
Implementation

Amount*(FY2002-FY2006)(FY2002-FY2005)(FY2004-FY2006)

154,468
16,335
13,382(FY2003-FY2006)(FY2004-FY2006)(FY2003-FY2006)(FY2004-FY2005)(FY2005-FY2006)(FY2002-FY2006)(FY2001-FY2006)

57,866
34,10027,09981,47428,800125,000
80,000*Figures in this column collected by the author from various sources.

than 10,000 million Baht each. Table 2 shows that Thaksin allocated funds for items that had neverbefore appeared in the budget, at a total cost of 255,700 million Baht.
Together, Tables 1 and 2 reveal the extraordinary financial demands of Thaksin’s reforms. If wecompare the sum of Tables 1 and 2 with the sum of the annual budget between the 2002 and 2006
fiscal years as shown in Table 3, we see that Thaksin’s reforms came to 15.1% of the total budget.
As noted earlier, the Thai annual budget consists mainly of current expenditures, with only amodest portion left for capital investments, which the government allocates at its discretion. Table
3 shows that, between the 2002 and 2006 fiscal years, the Thaksin government’s average annual
budget consisted of 73.44% current expenditures, 23.22% capital expenditures, and 3.34% for debt
repayment. At 15.1% of the total budget, in other words, Thaksin’s budgetary demands marked aheavy burden.

2. Budgeting System Reform under Thaksin
Since significant funds were required for Thaksin’s policies, Chaturon Chaisaeng7）initiated a reformof the budgeting system. Because the Bureau of the Budget had held the upper hand in allocations,politicians had difficulty distributing monies to their constituencies.8） The principle aim of reform

7）He was Minister of the Office of the Prime Minister from February 2001 to March 2002. He then served in other
Ministerial posts throughout the Thaksin administration.
8）Interview with Mr. Chaturon Chaisaeng, former Minister of the Office of the Prime Minister, November 20, 2008.

169

Asian and African Area Studies, 11 (2)Table 2. Budget Allocated to New Items
Unit: Million Baht
Fiscal Year

Budget Items

Amount

2002
2003
2004

Reserve for Economic Resuscitation
Expenditure for Economic and Social Restructuring
Expenditure for Strengthening National Competitiveness and Sustainable
Development- Expenditure for Strengthening National Competitiveness and Sustainable
Development- Expenditure for Project Implementation according to Provincial Development
Strategies- Expenditure for Project Implementation according to Provincial Cluster andProvincial Development Strategies- Expenditure for Tactic Adjustment and Accommodating Change

58,00016,60075,5002005

2006

23,40015,00040,00027,200Source: [Bureau of the Budget 2005]

Table 3. Composition of the Annual Budget
Unit: Million Baht
Fiscal Year Total Budget (1)
2002
2003
2004
2005
2006

1,023,000
999,000
1,028,000
1,200,000
1,360,000

Current Expenditures (2)[Percentage (2): (1)]Capital Expenditures (3)[Percentage (3): (1)]Debt Repayment (4)[Percentage (4): (1)]772,605.7 [75.5]
753,413.2 [75.4]
772,344.4 [75.2]
847,651.1 [70.6]
958,477.0 [70.5]

224,725.4 [22.0]
211,535 [21.1]
221,500.2 [21.5]
302,272.0 [25.2]
358,335.8 [26.3]

25,668.9 [2.5]34,951.8 [3.5]34,155.4 [3.3]50,076.3 [4.2]43,187.2 [3.2]

Source: [Bureau of the Budget 2005]

was to enable allocation to serve the policies and strategies of the government.9） A sub-committee10）
chaired by Mr. Chalongpop Susangkarn drafted a budget procedure bill11） to replace Budget
Procedure Act B.E. 2502. Since the government’s policy statement had mentioned budgeting system
reform,12）the cabinet had no reason in principle to obstruct the bill.
Under the new budget procedure bill, a Budget Policy Committee was to be established to determine allocations, and the Bureau of the Budget was to become the secretariat of the new committee.
Unlike Budget Procedure Act B.E. 2502, the new budget procedure bill did not grant budgetary
power to the Bureau of the Budget, but transferred it to the Budget Policy Committee. Table 4 below9）Interview with Mr. Chaturon Chaisaeng, former Minister of the Office of the Prime Minister, November 20, 2008.
10）This sub-committee was appointed by the Committee for Budgeting System Reform, chaired by Mr. Chaturon.
11）At the time, he was president of the Thailand Development Research Institute.
12）This reference had been inserted by Mr. Chaturon.

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PUNGPRAWAT: Thaksin and Budget Allocation

Table 4. Power to Regulate the Budget Process: Director General of the Bureau of the Budget Compared to
Budget Policy Committee
1. Authorities deciding budget
allocation

Director General of the Bureau of
the Budget

Budget Policy Committee

2. Description of powers

1. Require government agencies
to submit revenue andexpenditure estimates
2. Analyze government agency
budgets
3. Decide budget allocations togovernment agencies underapportionment system
4. Decide period allowed forgovernment agency budgeting
under apportionment system

1. Prepare annual andsupplemental budget bills
2. Prioritize strategic goals forgovernment agency spending
3. Stipulate principles andmethods of the Public Service
Agreement
4. Stipulate principles andmethods for assessing
government agency spendingin line with Public Service
Agreement
5. Stipulate budgeting systemstandards
6. Stipulate regulations forgovernment agency spending inline with annual budget act
7. Supervise government agency
spending in line with budget
spending plan
8. Stipulate standards and prepare
report on government agency
spending according to PublicService Agreement
9. Stipulate standards forgovernment agency annual
reports and budget spending
reports
10. Appoint sub-committee
to conduct Budget Policy
Committee duties
11. Conduct other budget-related
tasks under the direction of theCouncil of Ministers

compares the budgetary power of the Director General of the Bureau of the Budget under Budget
Procedure Act B.E. 2502 with the power of the Budget Policy Committee under the new budget
procedure bill.
The drafting of the new budget procedure bill was completed in 2002 and approved by theCouncil of Ministers in March 2003. The Council of State13） was charged with revising the bill13）It is a government agency, affiliated with the Office of the Prime Minister, in charge of legal affairs for theadministration.

171

Asian and African Area Studies, 11 (2)and was approached by the Bureau of the Budget several times to make changes. The Bureau of
the Budget feared political interference in the budgetary process and was ultimately able to prevent
finalization of the bill.14） The Thaksin government was, consequently, unable to present the bill toparliament for deliberation.
The Bureau of the Budget was able to easily thwart the Thaksin government for two reasons.
First, government leaders, who hailed from the business sector, understood problems with thebudgetary system differently from the politicians and did not sufficiently comprehend the principlesof the new bill. They did not, in other words, offer enough support for the bill to becomelaw.15） Second, as deliberations by the Council of State wore on, the Bureau of the Budget lobbied
government leaders to abandon the bill.16） According to Mr. Chaturon, “The cabinet approved thebill because the minister who took responsibility made a serious effort. When I was reshuffled to aportfolio that did not have any responsibility for the bill, to Minister of Justice, it was forgotten.”
Although the attempt to reform the budgeting system failed, the Strategic Performance Based
Budgeting System that was introduced in the 2002 fiscal year has been in use ever since. Every year,
cooperation between the National Economic and Social Development Board and the Bureau of the
Budget determines strategies for budget allocation. According to these strategies, every department
must coordinate its work and projects with overseeing entities, from the department to the ministry
to the nation. Each proposal, therefore, includes budgets allocated to the departments. Table 5
below shows proposals decided for the 2003 fiscal year.
Although the prime minister took an active role in reform, some ministers did not understandthe principles of the Strategic Performance Based Budgeting System. Nor did departments have theskills needed to prepare their budgets according to strategic performance. The old budgeting system

Table 5. Budget Allocation for Proposals for Fiscal Year 2003
Unit: Million Baht
Proposals

Allocation

1. Economic Resuscitation and Development
2. National Restructuring for Sustainable Competitiveness3. Social Development, Poverty Resolution and Quality of Life
4. Foreign Affairs and National Security
5. National Administration

139,254
56,410458,988
86,959258,290

Source: [Bureau of the Budget 2005]

14）Interview with Mr. Suranand Vejjajiva, former Minister of the Office of the Prime Minister, November 14, 2008.
15）Interview with Mr. Chaturon Chaisaeng, former Minister of the Office of the Prime Minister, November 20, 2008.
16）Interview with Mr. Chaturon Chaisaeng, former Minister of the Office of the Prime Minister, November 20, 2008.

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PUNGPRAWAT: Thaksin and Budget Allocation

did not require departments to prioritize their tasks when making budget requests. The Strategic
Performance Based Budgeting System, therefore, failed to meet expectations.17）
A large part of the annual budget, therefore, was prepared using methods of the old budgetingsystem. Prescribed strategies were inserted as an extention in the annual budget later [Thaksin 2004:
11], and they did not affect allocations. In the 2006 fiscal year, for example, there were ten proposals
for allocations. The development of human resources and quality of life obtained the largest shareof the budget: 437,772 million Baht. As in the old budgeting system, however, allocations for these
proposals came largely through three ministries: the Ministry of Education (199,271 million Baht),
Ministry of Public Health (52,194 million Baht) and the National Police Office (34,126 million Baht)[Bureau of the Budget 2005: 10-51].
In practice, the application of Strategic Performance Based Budgeting did not change allocations
under the Thaksin administration. The data in Table 6 below show that, except for allocations to
the Central Fund and revolving funds, the average ministerial share of allocations under Thaksin did
not differ significantly from the previous period, especially for such smaller ministries as the Ministryof Commerce, Ministry of Labor, Ministry of Foreign Affairs, and the Ministry of Industry. The
same group of ministries, moreover, ranked in the top five in terms of budget priority before andduring the Thaksin administration; this group included the Ministry of Education, Ministry of theInterior, Ministry of Defense, Ministry of Finance, and the Central Fund.18）
The Thaksin government was, in other words, unable to make significant changes to thebudgeting system. Allocations continued to be decided in the traditional fashion. But the Bureau of
the Budget was able to respond to the government’s demand for funds using traditional methods. It
successfully resisted budgeting system reform by persuading Thaksin and his key ministers that it
would allocate sufficient funds to implement government policies.19）

3. Budget Allocation under Thaksin
The Thaksin government was ultimately able to pursue its policies through the old budgeting system.
Most of the proposals in Table 7 below came from the Thai Rak Thai Party platform from the 2001
election. Central to the platform were three rural programs: an agrarian debt moratorium, a Village17）Interview with Mr. Chaturon Chaisaeng, former Minister of the Office of the Prime Minister, November 20, 2008.
18）The rank order within this group did differ before and during the Thaksin administration. Before Thaksin, theranking was: the Ministry of Education, Ministry of the Interior, Ministry of Defense, Ministry of Finance, and theCentral Fund. Under Thaksin, the ranking shifted to the Central Fund, Ministry of Education, Ministry of Finance,
Ministry of the Interior, and the Ministry of Defense.
19）Interview with Mr. Chaturon Chaisaeng, former Minister of the Office of the Prime Minister, November 20, 2008.

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Asian and African Area Studies, 11 (2)Table 6. Share of Budget Allocated to Ministries
Unit: %
Ministries
Central Fund
Office of the Prime Minister
DefenseFinance
Foreign Affairs
Agriculture and Cooperatives
Transportation
Commerce
Interior
Labor
Social Development and Human Security***
Justice
ScienceNatural Resources and Environment***
Education
Culture***Public HealthIndustry
University
Tourism and Sports***
Information Technology and Communication***Energy***Independent Public Agencies
Independent Public Bodies
State Enterprises
Revolving Funds

Before Thaksin*

During Thaksin
administration**

10.3
0.9
12.8
12.3
0.5
8.0
6.5
0.4
14.1
1.4
—
0.4
1.2
—
16.2
—
5.9
0.5
3.4
—
—
—
1.2
0.3
2.5
1.7

18.9
1.4
7.0
11.2
0.4
4.9
4.3
0.4
10.2
1.4
0.4
0.6
0.8
1.2
16.2
0.2
3.9
0.3
1.3
0.2
0.3
0.1
4.7
0.9
3.6
5.5

* Calculated by author from figures in Annual Budget Acts between 1988 and 2001 fiscal years.
** Calculated by author from figures in Annual Budget Acts between 2002 and 2006 fiscal
years.
*** These ministries were established after structural reform of the bureaucracy. Fiscal year
2004 was the first year these ministries received funding.

and Urban Community Fund, and a 30 Baht-per-Visit Healthcare Plan.
The agrarian debt moratorium consisted of two schemes. First was the suspension of farmers’
debts—both interest and principal—for three years. Second was debt alleviation: interest on loans
was reduced to three percent and additional borrowing was prohibited. The Village and Urban
Community Fund was a sum of one million Baht distributed to villages throughout the country tofacilitate small loans to rural residents. Under the 30 Baht-per-Visit Healthcare Plan, the Thaksin
administration provided universal healthcare for 30 Baht per visit.
responsibility for all other healthcare expenses.
174

The government assumed

PUNGPRAWAT: Thaksin and Budget Allocation

Table 7. Budget Sources for Thaksin Policies
Sources of Budget
1. Central Fund

2. Revolving fund
3. State enterprises
3.1 State enterprise incomes
3.2 Investment project
3.3 Usual business
3.4 Usual business with government
subsidies

Policies
1. Small-Medium-Large Village Development Fund
2. Inheritance Pension
3. Village and Urban Community Fund
4. 30 Baht-per-Visit Healthcare Plan
5. Scholarship Essay Competition and One
Amphur One Scholarship
6. Suvarnabhumi Airport
7. Peoples’ Bank
8. Securitization
9. Housing for the Poor
10. Debt Moratorium for Farmers

Table 7 shows that the Central Fund financed three policies, the revolving fund covered one
proposal, and state enterprises financed and operated six policies. State enterprises were a convenientsource of funding because their investments, which could be regarded as quasi-fiscal activities,
did not affect the budget deficit as conventionally measured [Mackenzie and Stella 1996: 1]. The
Thaksin government made effective use of such state enterprises as the Krung Thai Bank, the Bank
for Agriculture and Agricultural Cooperatives, the Government Housing Bank, and the Government
Savings Bank.
The Central Fund is a loophole within the budgeting system, because Article 10 of Budget
Procedure Act B.E. 2502 allows the government to dispense monies from the Central Fund separate
from departmental budgets. The convenience is that, unlike with departmental budgets, the government does not have to provide details of the Central Fund in the annual budget bill. The prime
minister, moreover, has full power to set the limits of the Central Fund, to which the Bureau of the
Budget usually accedes [Kanlaya 2007: 35].
Before Thaksin, the Central Fund was used for two objectives. First, it covered common
expenditures for all government agencies, such as benefits for government officers. Second, it wasused for unexpected outlays that could not be accurately estimated in advance, such as the Contingency Emergency Fund. The composition of the Central Fund changed significantly under Thaksin.
In addition to being used regularly as mentioned, more funds were allocated from the budget to
the Central Fund. The Thaksin government deployed the Central Fund for two purposes: policy
implementation and exercising more fiscal control through extraordinary budget items, as shown in
Table 2, Part 1.
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Asian and African Area Studies, 11 (2)Table 8. Composition of the Central Fund
Unit: Million Baht
Fiscal Year

Regular Central
Fund (%)

1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

86,689 (100)76,590 (100)76,911 (100)76,936 (100)86,912 (100)112,291 (61.0)
118,234 (80.1)
178,801 (67.3)
191,148 (76.4)
156,885 (61.2)

Policy Implementation
(%)
—
—
—
—
—
13,650 (7.4)
12,800 (8.7)
11,525 (4.3)
20,642 (8.3)
32,135 (12.5)

Extraordinary
Budget Items (%)

Total (%)

—
—
—
—
—
58,000 (31.6)
16,600 (11.2)
75,500 (28.4)
38,400 (15.3)
67,200 (26.3)

86,689 (100)76,590 (100)76,911 (100)76,936 (100)86,912 (100)183,941 (100)147,634 (100)265,826 (100)250,190 (100)256,220 (100)Source: [Bureau of the Budget 2005]

In the 2002 fiscal year, the Central Fund consisted of eighteen items. Fifteen were funded
on a regular basis, two were used for policy implementation, and one item was reserved as an
extraordinary budget item, intended to increase Thaksin’s power over allocations. Table 8 shows thecomposition of the Central Fund under the Thaksin administration. The magnitude of the Central
Fund increased significantly under Thaksin. Its share of the total budget rose from 9.6% in the 2001
fiscal year to 18.8% in 2006, and it reached its peak in 2004 of 22.9% of the total budget.20）
The Central Fund was used to finance three policies: the Small-Medium-Large Village
Development Fund, the Inheritance Pension for Living, and the Village and Urban Community Fund.
Extraordinary budget items were reserved as a lump-sum for the Thaksin government to spend atits discretion. These items were called “Ngob Phee,” or “budget of the ghost,” because they were
unidentifiable, and they varied from year to year.
The Thaksin cabinet decided on details of the extraordinary budget after parliamentary
approval of the annual budget bill. Interestingly, many projects that received funds from departments through the regular budget process also obtained support from the extraordinary budget.
For instance, in the 2002 fiscal year, a “Reserve for Economic Resuscitation” fund was allocatedto projects covered by regular departments, e.g., local roads construction (Department of Public
Works), road maintenance (Department of Highways), and police housing construction (National
Police Office) [Chitlada n.d.: 12-16].
The Thaksin government deployed the revolving fund in similar ways as the Central Fund.
20）Calculated by the author from figures in the Annual Budget Acts and the Additional Budget Acts. For the 2004
fiscal year, the mid-year additional budget was included in the calculation.

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PUNGPRAWAT: Thaksin and Budget Allocation

With full power to determine allocations in a revolving fund, Thaksin established a new one, theNational Health Security Fund, to implement the 30 Baht-per-Visit Healthcare Plan. Consequently,
monies allocated to the revolving fund under Thaksin increased from 3.9% of the total in the 2001
fiscal year to 5.7% in 2006.21）
It can be argued that budget allocation under Thaksin was based on a compromise between
the Bureau of the Budget and government leaders. Although the Bureau of the Budget had lobbied
to keep the budgeting system unchanged, it also supported Thaksin policies by allowing funding
through the Central Fund and revolving fund. Thaksin relied heavily on these funds as the principalmeans around the traditional practice of distributing monies through departments, in which the
Bureau of the Budget retained the upper hand.
The Central Fund was also critical to the Thaksin government for its convenience. Thaksin
explained that “under the inflexible budgeting system, the government reserved a small amount ofmoney—one or two percent of the total budget—to cope with some difficulties” [Thaksin 2004: 12].
The idea was based on a business management concept, because “there are no organizations in theworld that do not reserve cash for special projects that they want to undertake or for emergencies.” 22）In other words, an important part of governance is handling urgent ad hoc tasks. The old budgetingsystem, however, could not muster the financial resources required in an emergency. The Thaksin
government needed the Central Fund in part to solve urgent problems.23）

4. Effects of Budget Allocation on Public Finances under Thaksin
The varied means of allocation used by the Thaksin government give the appearance of reckless
spending. The empirical data indicate, however, that Thailand’s macro economy was not at risk
under Thaksin. The data in Table 9 below reveal that total government debt did not increasesignificantly. Government debt in the last year of the Thaksin administration differed little fromeither the first year or last year of the previous government. It stood at 25% of GDP in 2006 compared to 24.8 and 23.5% in 2001 and 2000, respectively. The Thaksin government was, moreover,able to transform a deficit into a balanced budget in the 2005 fiscal year, as shown in Table 10.
There are three important fiscal rules in Thailand, which are determined primarily by theConstitution, Treasury Reserve Act B.E. 2491, and Budget Procedure Act B.E. 2502. The first rule
requires legislative approval for spending. The second regulates national revenues and expenditures:21）Calculated by the author from figures in the Annual Budget Acts.
22）Interview with Mr. Suranand Vejjajiva, former Minister of the Office of the Prime Minister, November 14, 2008.
23）Interview with Mr. Chaturon Chaisaeng, former Minister of the Office of the Prime Minister, November 20, 2008.

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Asian and African Area Studies, 11 (2)Table 9. Internal and External Government Debt
Unit: Million Baht
Year

Government Debt

GDP at current prices

Government Debt Share of GDP* (%)

1997
1998**
1999
2000
2001
2002
2003
2004
2005
2006

325,537
694,206
991,104
1,156,584
1,272,856
1,691,158
1,631,124
1,810,439
1,857,247
1,954,038

4,732,600
4,626,400
4,637,000
4,922,700
5,133,500
5,450,600
5,917,300
6,489,400
7,095,600
7,830,300

6.9
15.0
21.4
23.5
24.8
31.0
27.6
27.9
26.2
25.0

* Calculated by author.
** In 1998 government debt rose sharply following the 1997 economic crisis.
Source: [Bank of Thailand 2008]

Table 10. Budget Deficits
Unit: Million Baht
Fiscal Year

Total Budget

Estimated Revenues

Budget Deficit

1997
1998*
1999
2000
2001
2002
2003
2004
2005
2006

984,000
982,000
825,000
860,000
910,000
1,023000
999,000
1,028,000
1,200,000
1,360,000

984,000
982,000
800,000
750,000
805,000
823,000
805,000
928,100
1,200,000
1,360,000——
25,000110,000
105,000
200,000
194,000
99,900——*As a result of the economic crisis, the total budget for the 1998 fiscal year was reduced to 800,000 million
Baht, and estimated revenues were reduced to 782,020 million Baht. The budget that year ultimately
showed a deficit of 17,980 million Baht.
Source: [Bureau of the Budget 2005]

all transactions must be conducted through the Treasury Reserve Account. The third and mostimportant rule states that the annual budget deficit cannot exceed 20% of the total plus 80% of
expenditures for debt repayment. The Thaksin government did not violate any of these rules.
Steady increases in the annual budget under Thaksin were in keeping with continued economic
growth.24） Actual government revenues, moreover, exceeded estimates in most fiscal years. Of the24）Between 2002 and 2006, the average growth rate of the annual budget was 7.7%, whereas the average GDP growthrate was 5.7%. The growth rate of the annual budget is calculated from figures in the Annual Budget Acts. The
GDP growth rate comes from the Bank of Thailand. For more details, see [Bank of Thailand 2008].

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PUNGPRAWAT: Thaksin and Budget Allocation

three revenue-collecting departments—the Revenue Department, the Excise Department, and theCustoms Department—the Revenue Department was most important for increasing tax income.
If the increase in tax income followed economic growth, it also confirmed Revenue Department projections.

The Revenue Department underwent two important changes with Thaksin:

restructuring, and a new method of tax collection. Before restructuring, tax collection within the
Revenue Department was divided between the central administration and the provinces. The central
administration was charged with tax collection in Bangkok, where many area offices were located.
Provincial Revenue Offices in each province took responsibility for local revenues. The Heads ofthese offices answered to provincial governors. Following restructuring, the Revenue Department
was centralized and Provincial Revenue Offices abolished. Tax collection was consolidated into one
unit under the central administration [Revenue Department 2003: 38]. Provincial offices becamearea offices reporting directly, like area offices in Bangkok, to the Director General of the Revenue
Department.
The most important cause of increased tax revenues was a change in the method of tax collection. In the past, punishment through auditing of prior payments was the preferred weapon against
tax evasion. The Thaksin administration, however, introduced moral suasion. The Revenue Department closely monitored taxpayers, especially businesses, and persuaded them to make accurate
payments. Meanwhile, audits were reduced [Revenue Department 2003: 48, 2004: 50]. Taxpayers
responded well to this change, and tax revenue increased.
The new system saw officers from the Revenue Department dispatched to business firms tocheck the accuracy of payments. The officers used data from other sources, e.g., electricity andwater usage and number of employees registered with the Social Security Office, to assess the actual
incomes of the firms [Prachachartturakit, May 13, 2005]. The Revenue Department established the
Bureau of Large Business Tax Administration to supervise large taxpayers. This Bureau provided
legal services and individual consultation for each firm [Revenue Department 2004: 33].
The Revenue Department also succeeded in increasing the number of taxpayers. In 2004, it
persuaded 201,329 new taxpayers [Ministry of Finance 2004: 2] to register in its database of sevenmillion taxpayers. As a result of more efficient collection, tax revenues increased continually underThaksin. Table 11 shows that all major forms of tax revenue—personal income tax, corporate tax,
and value added tax—increased every fiscal year.

Conclusion
Popular policies and dramatic reforms made Thaksin seem a strong executive. The government was179

Asian and African Area Studies, 11 (2)Table 11. Tax Revenues Collected by Revenue Department
Unit: Million Baht
Fiscal Year
2002

Fiscal Year
2003

Fiscal Year
2004

Fiscal Year2005

Fiscal Year
2006

Personal Income Tax
Corporate Tax
Value Added Tax
Specific Business Tax
Petroleum Tax
Stamp Duty
Other Income

108,371
170,415228,196
13,715
19,1284,122
334

117,309
208,859
261,306
12,757
21,773
5,348
331

135,220
261,925
316,103
20,03331,935
6,821
279

147,395
329,558
385,718
26,307
41,1786,821
266

170,087
374,818
417,770
30,62556,524
7,260
243

Total

544,281627,682

772,316

937,243

1,057,327

Tax Type

Source: [Revenue Department]

not, however, able to establish full control over the budget. Thaksin failed to create a Budget Policy
Committee, which would have transferred the power of allocation from the Bureau of the Budget toThailand’s politicians.
Thaksin did, however, take advantage of a loophole in the old budgeting system to finance its
policies. Rather than work exclusively through the departments as usual, the government made gooduse of the Central Fund and revolving fund, over which it had full power. It also looked to state
enterprises. Extraordinary budget items added to the Central Fund marked the final powerful tool in
the government’s effort to finance its policies.
Thaksin’s methods for budget allocation were not, however, institutionalized. Following thecollapse of his government, some of these methods were abandoned. The share of the total budget
allocated to the Central Fund decreased from 18.8% in the 2006 fiscal year, the last annual budget
prepared by Thaksin, to 12.6, 14.6, and 13.6% in 2007, 2008, and 2009,25）respectively.26） Extraordinary budget items, or Ngob Phee, which had nicely served Thailand’s politicians, were removed
from the budget in the 2007 fiscal year. By contrast, funds allocated to the Ministry of Defense,
which served the demands of the bureaucracy, increased. Although the growing share of defensemonies does not seem permanent, it rose from 6.3% of the total budget in the 2006 fiscal year to 7.3
and 8.6% in 2007 and 2008, respectively.27）25）Even though the annual budget for the 2009 fiscal year was prepared by the Samak government led by the Palang
Prachachon Party, most ministers came from the Thai Rak Thai Party. The Central Fund is much less significant
now than in the 2006 fiscal year.
26）Calculated by the author from figures in the Annual Budget Acts.
27）Calculated by the author from figures in the Annual Budget Acts.

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PUNGPRAWAT: Thaksin and Budget Allocation

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181

Asian and African Area Studies, 11 (2)Online Document
Bank of Thailand. 2008.〈http://www.bot.or.th/English/Statistics/Indicators/Docs/indicators.pdf〉(December
20, 2008)
Interviews
Interview with Mr. Chaturon Chaisaeng, former Minister of the Office of the Prime Minister, November 20,
2008.
Interview with Mr. Pisit Lee-Atham, former Deputy Minister of Finance, March 11, 2008.
Interview with Mr. Suranand Vejjajiva, former Minister of the Office of the Prime Minister, November 14,
2008.

182