Study reveals ineffective use of budgets by govts

In its research report titled “Lessons from Thailand’s10 previous fiscal year budgets”, the foundation has analysed and presented five facts that show whether the government’s fiscal-year budgets were spent wisely, or wastefully, to serve as lessons for the future.

Sethaput Suthiwart-Narueput, chairman of the board of directors of the foundation, said most people just look at the percentage increase in current year’s fiscal budget over that of the previous year and the amount of budget allocated to each ministry. Such a comparative view of the fiscal budget on a yearly basis may shield us from the macro perspective of the budget. Hence, the foundation chose to study the overall structure of the Thai government’s fiscal budgets of the past 10 years. 

The study discovered five important facts:

1 In the past decade, the expenditure budget rose 2.4 times, or Bt1.4 trillion, while the investment budget rose only 1.5 times and accounted for only 12 per cent of the budget. Furthermore, 9.2 per cent annual increase in the expenditure budget grew at a faster rate than Thailand’s average annual gross domestic product (GDP) growth rate (inflation included) of only 7.2 per cent a year.

2 The investment budget could be lower than the Bt440 billion, or 17 per cent of total budget stated in most reports as actual investment spending was only Bt300 billion, according to government finance statistics figures for permanent assets purchases.

3 The budget is not being allocated according to the country’s strategic policies, but it is just a sharing of budget funds among the various ministries, which does not reflect the changing needs of the country or changes in the economic, social and political environments. The Education Ministry and the Interior Ministry received a rather sharp increase in budget allocation, while the Science Ministry and the Energy Ministry, which are vital to the country’s ability to compete with other nations, received lower budget allocations.

4 The allocation of the fiscal-year budget does not support efficient and transparent use of the budget, for example the central budget grew twofold over the past decade, on par with the combined budgets of the Defence, Transport, Information, Communications and Technology and Labour ministries. The central budget is not subject to strict rules of accountability and transparency as other budgets allocated to the various ministries. The prime minister has the authority to tap funds in the central budget when deemed necessary. The government emergency reserve fund has grown eightfold over the past decade and is often not being utilised within the budget.

5 Each yearly increase in budget does not necessarily mean better benefits for the country as evident in the case of the Education Ministry whose budget has risen twofold in the past decade while Thai students continue to perform poorly in mathematics; or the Transport  Ministry receiving yearly budget increases, while Thailand’s logistics capabilities ranking dropped to 38th in 2012 from 31st in 2007. 

The foundation research has suggested that: 

_ Budgets should be spent to support the country’s strategic development policies according to priorities, which may change from year to year.

_ Effectiveness of budget utilisation must be measured to see if it is achieving the desired results.

_ Conduct cost analysis to see if budget spending is worthwhile, or feasible, and set up cost structure comparative standards/scale, Sethaput concluded.