Thailand

Key development challenges

Thailand is an upper middle-income country with ambitions to become a high-income country by 2037. Its $505 billion economy accounts for 11% of the regional GDP of Southeast Asia, and with a population of at least 71 million, its GDP per capita is $7,066 — the fourth-highest in the region.

Thailand is widely seen as a development success story, moving from a low-income country to an upper middle-income country in less than a generation. However, progress has slowed since 2015 amid political instability that has undermined economic growth and efforts to reduce poverty. Thailand’s Human Development Index ranking is 66th out of 191 countries, and 6.8% of the population live below the national poverty line. Thailand ranks 110th out of 180 in Transparency International’s Corruption Perceptions Index. The World Bank identifies political instability as the key risk to Thailand’s future progress, noting that governance indicators and the quality of the bureaucracy have worsened in the past decade.

Over the 2015–21 period, more than 7,245 projects were implemented by 61 development partners in Thailand, for a total of more than $8.3 billion or about $1.18 billion per year on average.

Overview of development finance trends

Between 2015 and 2021, Thailand received the seventh-highest volume of official development finance (ODF) in the region. Development finance disbursements averaged $1.2 billion annually over the period. From 2020 to 2021, disbursements tripled, mostly due to large OOF (other official flows) loans from the Asian Development Bank (ADB) for the country’s Covid-19 response.

Levels of development finance relative to Thailand’s GDP are marginal, with the peak in 2021 remaining below 0.5%. The impact of the rise in disbursements from 2020 to 2021 is also magnified by a contraction in GDP in 2020 and low GDP growth in 2021.

Commitments are generally higher than disbursements in Thailand. Across the seven-year period, disbursements were equal to only 29% of committed ODF. The ADB implemented 70% of its committed finance, but China disbursed only 11% of its commitments.

Main development partners

By spending, Thailand’s top three development partners are China, the ADB, and Japan. Together, they account for 78% 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 Tha004, for which $600 million has been disbursed from a committed $12 billion concessional loan (ODA), and a 2017 disbursement of an OOF loan Tha003 from the China Export–Import Bank to the Thailand Export–Import Bank, for cooperation in trade financing and investment.

The ADB’s financing to Thailand has varied from year to year, with low disbursements in 2017 and 2019, but a significant support package in 2021 in response to Covid-19. The ADB provides only OOF loans to Thailand and all of its spending is concentrated in three sectors: government and civil society, transport and storage, and energy. In transport and storage, the focus is on projects improving public transport services, and in the energy sector, the ADB concentrates on energy conservation and demand-side efficiency.

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 2016003059 - JICATXXXIV-1, financed by a $1.5 billion official development assistance (ODA) loan from the Japanese Bank of International Cooperation (JBIC).

Overall, 47% of ODF disbursed in Thailand between 2015 and 2021 was ODA (both grants and concessional loans).

In terms of implementing partners, the central government of Thailand has been the major recipient of flows from international partners, especially its Ministry of Finance. Chinese state-owned enterprises were also major implementing partners in the infrastructure sector.

Sectors

In terms of sectoral distribution 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 2016003059 - JICATXXXIV-1, worth $1.5 billion. Public finance management is the primary purpose of spending in the government and civil society sector, predominantly from the ADB for Covid-19 support. The vast majority of funding in the government and civil society sector takes the form of OOF loans. Wind farm projects received the most finance in the energy sector, entirely funded by the ADB and China through OOF loans.

Spending in Thailand on human development remained low, increasing substantially in 2021 due to the delivery of Covid-19 vaccines by development partners. Infrastructure spending escalated rapidly from 2015 to 2017 but has since largely levelled out, experiencing a dip in 2019 before recovering in 2020 and 2021.

Climate

The Southeast Asia Aid Map uses an adapted version of the Organisation for Economic Co-operation and Development’s (OECD’s) climate marking system to sort projects into three distinct categories: principal, where climate change mitigation or adaptation is explicitly stated as fundamental to the project; significant, where climate change mitigation or adaptation is explicitly stated but not fundamental; and not climate-related, where climate change is not targeted in any significant way.

Over the period analysed, climate development finance flows changed significantly in Thailand. Although projects marked “principal” 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 significantly over time; while significant projects, mostly in the transport and storage sector, have become increasingly dominant. Most climate-related projects are financed through concessional ODA loans, and the largest development partner in this space is Japan.

Thailand as an ODF provider

While Thailand is still ODA-eligible and a development assistance recipient, 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 intraregional ODF. Laos is the largest recipient of Thai development finance, receiving 58% 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, though flows to Myanmar have reduced dramatically since the military coup in February 2021.

On average, Thailand spends $64 million annually on aid to its Southeast Asian neighbours. More than half (58%) takes the form of grants, while the remainder is concessional loans.