Legitimate ownershipof ThailandMay,2008

Yasutami Shimomura
Hosei University

Part 1
A guide to ownership1

Ownership:What money cannot buy• Emphasis on ownership and partnership as thelinchpin of aid effectiveness since DAC ｓ New
Development Strategy of 1996•

It is clear to all of us that ownership isessential.
(James Wolfensohn, Proposal for aComprehensive Development Framework, 1999)

Ownership: Mainstream Views• Countries must be in the driver s seatand set the course (Wolfensohn, 1999)• Ownership: strong domestic support ofreforms and a prerequisite for successthe lending cum conditionality works well only
when local polities have decided, largely on theirown, possibly with outside technical help, toaddress their reform needs(World Bank, Assessing Aid,1998)

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Ownership:
In the reality of aid relationship• Recipient country could be in the driver s seatand seize the wheel.
• (Donors) can put extra fuel in the tank if the car
is heading in the right direction(Editorial, Financial Times, August 21, 2001)• A driver finds soon that fuel is not supplied,
whenever he tries to choose a wrong direction,from the viewpoint of the aid community.

How to survive in the jungleof aid relationship••Powerful countries, such as China andIndia, with strong bargaining power andlow aid dependency do not need to worry
about
Two options for less fortunate countries:

1) Playing a good boy : Ghana2) Gaining ownership: Vietnam, Thailand

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How to gain ownership• Practical and theoretical hints could be
drawn from in-depth case studies of aid
relationship.
• Accumulation of in-depth case studies isexpected to lead to a set of practical knowhow for policy makers of developing
countries. It also contributes to economic
thought.

Lessons fromthe cases of Thailand• Recipient should claim the legitimacy ofownership through showing:a) Policy is base on a broad consensusb) Policy is rational and logically consistent• Recipient should show that donors have to
pay big cost if they try to impose theirviews.

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Part 2The case of Thailand
in the 1980s:
Export promotion attempts

Two aspectsof export capacity• Hardware: well functioning physicalinfrastructure to streamline production anddistribution
Case: Eastern Seaboard Development Plan

• Software: know-how and marketing andsales promotion in the international market
Case: The First White Paper on Thai-Japanese
Economic Relations, 1985

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Eastern Seaboard Development Plan
• Challenge 1
Grand scale and complicated nature
1)Industrial complexes with deep sea ports
in Laem Chabang and Map Ta Pud
2) Various utilities
3) Chemical fertilizer plant of NFC
Task 1: How to prevent serious corruption,
which is common in big infrastructure
projectsgp jp

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Eastern Seaboard Development Plan
• Challenge 2
Sharp differences of opinions: main program• Critics: Concern over the heavy fiscal and debt
burden (4% of national fixed capital investment)(Economists in Thailand and the World Bank)• Supporters: Vision of export-led growth withmodern and high-standard infrastructure(Development planners in Thailand and thegovernment of Japan)

Eastern Seaboard Development Plan
• Challenge 2 (continued)
Sharp differences of opinions: fertilizer
plant• Critics: Concern over loss making(Economists and bankers in Thailand)• Supporters: self-sufficiency of fertilizer(Development planners in Thailand, theWorld Bank, and the government ofJapan)

7Eastern Seaboard Development Plan

Challenge 2 (continued)

Task 2:• How to attain concerted actions for
effective execution despite split of opinions
among the Thai leaders• How to avoid conflict with the donors
without losing ownership

Choice made by Thailand:
Not in conformity with donors
recommendation• Main program: delay of theimplementation, maintaining the basic
structure of the plan
World Bank: elimination of two ports
Japan: Implementation as scheduled
NFC fertilizer plant: de facto
cancellation
World Bank and Japan: implementation asplanned

8How Thailand could carry out theopinion of its own?
•Legitimacy of the choices

1)

Rational decision making
Thorough examination of feasibility andmacroeconomic impacts
Compromise between two contending forces
Disputes between two contending forces
Prime Minister played supporters and critics against
each other, as a balancer
Transparency and openness based on free press
Whole process of scrutiny was fully covered by massmedia2)

3)

Achievements of the Eastern Seaboard
Development Plan• Export hub and the center of technology
intensive industries:
14 industrial estates; 360,000 workers; 1300
factories; 516 auto related factories• The plan did not cause any fiscal and debt
problem, any notable conflict with donors, andany serious scandals• NFC fertilizer plant could be loss making
according to our ex-post simulation• Dividend to Thailand s ownership

9First White Paper on ThaiJapanese Economic Relations•Main policy agenda in Thailand in themid 1980s
1) To recover economic growth2) To improve external balance
To transform the export structure3) To improve social stability
To accelerate rural development

Strong frustration in Thailand• Widening trade deficit with Japan• Delay in opening the Japanese market
Particularly the dispute on the import dutyon boneless chicken• Dominance of Japanese goods in Thailand• Anti-Japanese movement anddemonstration

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Diagnosis madeby the Thai leaders
The most urgent tasks:
1) To reduce widening trade deficit with Japan
2) To transform the pattern of Japan s direct
investment from import substitution to export
promotion
White Paper (June, 1985): Urging the Japanese government to promotebetter coordination between trade, direct
investment, and aid, utilizing the Japan s
private sector

Achievements• Japan s response
Concerted actions to promote exportoriented direct investment and technology
transfer to ASEAN, encouraging theJapanese private sector
Comprehensive Programme on Promoting
Investment and Technical Transfer between
Japan and ASEAN, August 1985

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Sources of the achievements
1) Broad consensus in Thailand among
public and private sector leaders
2) Joint action with other ASEAN nations
3) Various movements and demonstration
against Japan

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