PERFORMANCE BUDGETING IN THAILAND

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PERFORMANCE BUDGETING IN THAILAND GEOFF
DIXON FORMER CONSULTANT, THAI BUREAU OF THE
BUDGET
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Thai budgeting has been very centralized

• very detailed budget categories

• cash allotments within each budget year

• pre-audit of spending transactions (soft)

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• This results in
• strong control of the budget bottom line
• but
• weak control of budget composition and
  efficiency

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• The challenge is to improve the TRADE-OFF
  between
• macro fiscal control, and
• compositional and operational efficiency

How? By introducing performance budgeting
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PERFORMANCE BUDGETING MEANS 1. Output driven
budgeting

• identifying agency outputs
• costing those outputs
• basing budget allocations on this information

In the Thai case this meant identifying and
costing output classes
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PERFORMANCE BUDGETING MEANS 2. Empowering
program agencies to manage

• internalizing control of inputs

• providing a predictable funding environment

In the Thai case this meant broader budget
categories MTEF
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PERFORMANCE BUDGETING MEANS 3. Replacing
external control over inputs with external
control over outputs

• reporting budget-year outputs against budget
  preparation assumptions

• introducing broader performance indicators for
  policy management

In the Thai case this meant sector experts
helping develop performance indicators
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Input control
Output control
External control
Internal control
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Internal versus external control (agency
autonomy)
New Zealand
Aust pre 90s
Thailand
Cambodia
Output versus input control (performance focus)
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Transitioning to performance budgeting 1. How to
manage change in program agencies?
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The chicken/egg problem in moving program
agencies from external to internal control

• agency skills are in obtaining resources
  rather than internally allocating them

• the Budget Bureau argues that reducing its
  controls is therefore dangerous

The result HIATUS
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The 7 hurdles attempted to break the impasse by
making BOB concessions to an agency conditional
on hurdle standards in 7 areas

•     budget planning
•     output costing
•     procurement management
•     budget/funds control
•     financial and performance reporting
•     asset management
•     internal audit

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The reform process is formalized for each of six
pilot agencies by

• a memorandum of understanding with BOB at the
  start of the reform process
• a resource agreement with BOB when the seven
  hurdles are met

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Transitioning to performance budgeting 2. How
to manage change in the budget agency?
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• The focus of BOB control should shift FROM
• whether actual spending is consistent with very
  detailed pre-specified categories and conditions
  TO
• whether agencies use of budget funds in a
  freer operating environment is effective

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The challenge for the Bureau of the Budget

• refocus from agency control to agency analysis

• refocus from amounts of inputs to amounts of
  outputs and input- output links

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The Bureau of the Budget must change from

• an enforcer of rules to
• an evaluator of performance

It is already familiar with this role in budget
preparation The role will need to extend through
to budget execution

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Transitioning to performance budgeting 3. Is
the hurdle approach migratable?
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There are two approaches to managing budget
reform in change resistant environments

• sequence the STAGES OF REFORM - output
  identification/perf. indicators/devolution /MTEF

• sequence the AGENCIES TO BE REFORMED, with
  multi-stage package for each agency upon meeting
  hurdle standards

The Thais adopted the second approach
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This reflected the Budget Bureaus difficulty in
quickly providing technical leadership

• spearhead for reform was six reform focused
  agencies

• each had an integrated package of reform

• budgetary freedoms would be granted by BOB
  conditional on meeting 7 hurdles

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The hurdle approach is well suited to Thailand

• progress is possible in program agencies even
  though progress is slow in BOB

• hurdle approach is failsafe for BOB and more
  likely to win its acceptance

• there is a stronger incentive package for
  individual agencies to reform due to hurdle
  conditionality

• it provides an integrating framework for
  different reforms required in budget and program
  agencies

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• In countries in which the budget bureau itself
  has achieved critical reform momentum the
  alternative of
• sequencing by reform stages (each stage
  simultaneously introduced across all agencies)
  rather than
• reform agencies (each of which is offered a
  multi-stage reform package when hurdles are
  met)
• should be considered