Thailand

Key development challenges

Thailand is an upper middle-income country, with a $495 billion economy (2022) accounting for 13.7% of Southeast Asia’s GDP. With a population of more than 71.5 million, Thailand’s GDP per capita is $6,909 — the fourth-highest in the region after Singapore, Brunei, and Malaysia.

Thailand is widely seen as a development success story, moving from low-income to upper middle-income status in less than a generation. However, progress has slowed since 2015 amid political instability that has undermined economic growth and efforts to reduce poverty. The World Bank identifies political instability as the key risk to Thailand’s progress, noting that governance indicators and the quality of the bureaucracy have worsened in the past decade.

Over the 2015–22 period, more than 8,000 projects were implemented by 62 development partners in Thailand, for a total of more than $11 billion, or about $1.4 billion per year on average.

Overview of development finance trends

Between 2015 and 2022, Thailand received the seventh-highest volume of official development finance (ODF) in the region. From 2020 to 2021, disbursements tripled, mostly due to large OOF (other official flows) loans from the Asian Development Bank (ADB) for Covid-19 response. In 2022, ODF levels fell back to the pre-pandemic annual average of $1 billion.

Levels of development finance relative to Thailand’s GDP are marginal, at 0.2%.

From 2015 to 2022, disbursements only accounted for 33% of committed ODF. The ADB implemented 96% of its committed finance, but China disbursed only 13% of its commitments.

Main development partners

By spending, Thailand’s top three development partners are China, the ADB, and Japan. Together, they account for 81% of development finance disbursed in the country.

China’s involvement in Thailand’s development is dominated by loans. Notable projects include the Thailand–China High-Speed Rail Project, for which $600 million has been disbursed from a committed $12 billion concessional loan, and a 2017 disbursement of an OOF loan from the China Export–Import Bank to the Export–Import Bank of Thailand, for cooperation in trade financing and investment.

The ADB’s financing to Thailand has varied from year to year, with a significant support package in 2021 in response to Covid-19. Its spending is concentrated in government and civil society, energy, and transport and storage.

Japan’s development finance to Thailand is entirely concessional, predominantly provided through loans. Projects in the transport and storage sector account for the vast majority of Japan’s disbursements, especially rail infrastructure projects such as the Mass Transit System Project in Bangkok, financed by a $1.5 billion concessional loan from the Japan Bank for International Cooperation.

Sectors

Compared to the rest of the region, ODF in Thailand is heavily concentrated in the transport and storage, and government and civil society sectors.

Spending in the transport and storage sector is focused on rail infrastructure. One of the largest projects is the Japan-backed Mass Transit System Project in Bangkok, worth $1.5 billion. The main focus of spending in the government and civil society sector is for public finance management systems, notably driven by the ADB. Most of the funding in the government and civil society sector takes the form of non-concessional loans. Wind farm projects received the most finance in the energy sector, entirely funded by the ADB and China through OOF loans.

Climate

Climate development finance flows changed significantly in Thailand from 2015 to 2022. Although projects marked with a “principal” focus on climate adaptation and mitigation in 2015 accounted for much more finance than “significant” projects — representing 95% of all climate-related flows in that year — the opposite is now true, after consistent declines in “principal” projects and a growth in “significant” projects. This change can be largely explained by just two sectors: “principal” projects in the early stages were mostly in the energy sector, which has declined over time; while “significant” projects, mostly in the transport and storage sector, have become dominant. Most climate-related projects are financed through concessional (official development assistance or ODA) loans, and the largest development partner in this space is Japan.

Gender

Between 2015 and 2022, $3 billion was disbursed annually in gender equality finance in Thailand, equivalent to 28% of total ODF disbursed in the country. The ADB, Japan, and Germany are the top three providers, and government and civil society is the dominant sector. Projects with a “principal” focus on gender equality have been consistently low, at just 0.2% of total ODF, while projects with a “significant” focus account for 28%. A notable spike in spending in 2021 was due to disbursements under the ADB’s Covid-19 Active Response and Expenditure Support Program.

Thailand as an ODF provider

While Thailand is still eligible for — and a recipient of — official development assistance, its transition to development partner has been remarkable. Thai cooperation with neighbouring countries goes as far back as 1963, when technical cooperation programs began in response to political instability and Cold War tensions. This accelerated in 2003, when then prime minister Thaksin launched the Forward Engagement strategy to establish Thailand as a provider of development assistance. Most of its development assistance is coordinated through the Thailand International Development Cooperation Agency (TICA) under the Ministry of Foreign Affairs.

Thailand’s aid program is the largest in the region, accounting for 85% of intra-regional ODF. Laos is the largest recipient of Thai development finance, receiving 61% of TICA’s development flows, mostly directed at construction and the improvement of national roads. Myanmar and Cambodia also receive considerable amounts of development finance from Thailand. On average, Thailand spends $67 million annually on aid to its Southeast Asian neighbours, with 60% in the form of grants, and the remainder in concessional loans.