Thailand's smaller cities can help drive economic growth and reduce inequality
Thailand's cities outside Bangkok can accelerate the country's growth but will need to find ways to access private capital to improve urban infrastructure, a World Bank study produced with the Program Management Unit on Area Based Development (PMU-A) and Khon Kaen University says.
Bangkok has long been the country's hub of economic growth and productivity. But as that growth slows, cities such as Chiang Mai, Khon Kaen, and Rayong could pick up the baton with investments in mass transit systems, renewable energy, and other urban infrastructure, which will be critical for Thailand's competitiveness and ability to adapt to a changing climate according to the study, "Thailand Urban Infrastructure Finance Assessment." However, to fund these investments, cities cannot rely solely on central government budgets, and should consider municipal borrowing and public-private partnerships, the report says.
Urban growth will provide benefits to city and country populations alike through more reliable transportation and electrification and access to markets, education, and health services. It will enable people, goods, and services to move efficiently within and across cities to promote growth, jobs, and improve the quality of life. Public services such as water and wastewater and solid waste management bring environmental as well as health benefits. A more robust urban infrastructure will provide resilience against floods and droughts.
"Secondary cities can drive growth and alleviate rural poverty by generating accessible opportunities for those living in rural areas," said Patricia Mongkhonvanit, Director-General of the Public Debt Management Office, Ministry of Finance. "The Ministry of Finance will leverage the insights and findings presented in the study to support urban growth in these cities to meet the needs of the residents, businesses and industries."
Enabling Thailand's secondary cities to raise capital themselves would avoid increasing burdens on the national government's fiscal resources, the report says. Yet, Thai cities and local governments remain fiscally dependent on central government for infrastructure investments despite decentralization legislation in the 1990s. However, municipalities have the tax bases and operating surpluses necessary to develop creditworthiness and borrowing capacity.
The study urges a "paradigm shift" to give secondary cities the authority, tools, and expertise to finance local infrastructure. Recommended steps include articulating a national strategy to attract private investment for public infrastructure and the creation of government units to monitor and support local infrastructure projects and planning. Greater flexibility, fiscal autonomy, and accountability are necessary for secondary cities if they are to develop their ability to attract investors and lenders, the report says.
"As Thailand strives for sustainable urban development, local fiscal autonomy emerges as a vital pillar," said Fabrizio Zarcone, World Bank Country Manager for Thailand. "Enabling cities to generate and control revenue streams fosters innovation, accountability, and responsiveness to community needs, ultimately leading to more resilient and self-reliant urban areas."
The study assesses the feasibility of project proposals in five Thai cities – Chiang Mai, Rayong, Nakhon Sawan, Khon Kaen, and Phuket. The report also discusses policies and institutions that govern how city authorities manage their finances, including raising capital for infrastructure investment.
"Municipal borrowing and public-private partnerships offer a reliable path to urban infrastructure development that has been proven in countries around the world," said Poon Thingburanathum, Deputy Director of Corporate Planning at the Program Management Unit on Area-based Development. "What is needed is a pragmatic national effort to attract private sector capital to invest in urban infrastructure."
