Public Sector Governance and Accountability Series: Budgeting and ...

168 Anwar Shah and Chunli Shen
Overall, the Chilean performance budgeting system is well developed,
especially in terms of the attention and priority given to performance information
in the budget process and the realistic use of this information in
decision making. The weakness in the Chilean system is that the performance
system is heavily centralized. It would be desirable to build up agencies’
capacity so that they have more say in decisions about indicators and measures.
Nevertheless, Chile remains a good example of how performance budgeting
reforms have promoted efficient allocation of resources, enhanced public
management, and improved transparent and accountable governance. It is
important to note that Chile has pursued a top-down reform approach
because of the unchallenged power of its executive in the budget process. In
a country where legislatures play a more powerful role, such a centrally
directed process would not be plausible (Panzardi 2005).
Thailand: strategic performance budgeting (1997–present)
Thailand’s drive for performance budgeting presents an interesting case for
examining the transition from a highly centralized line-item budgeting
system focused predominantly on input controls to a performance-oriented
budgeting system emphasizing outputs and managerial flexibility. Thailand
had a centralized budgeting process based on line-item input budgeting,
which contributed to strong aggregate fiscal discipline. Decisions about
the details of spending were made centrally, with little or no reference to
the results of the spending. The Bureau of the Budget (BOB), a very powerful
budgeting entity, controls each agency’s spending in detail through
numerous separate budget allocations (that is, detailed line itemizing)
(Dixon 2005).
Government managers recognized that strong central inputs control
was being achieved at the expense of allocative and operational efficiencies.
In 1997, the royal Thai government was forced by the Asian financial crisis
to reorient the budget process to focus more on performance and results.
The crisis mandated sharp spending cuts in response to falling revenues and
shifted the normal budget surplus into a string of deficits. The reform trajectory
of the Thai government can be divided into two phases, separated by
the formation of the new government of Prime Minister Thaksin Shinawatra
in February 2001.
phase 1 (1997 to 2000): the hurdle approach
(conditional devolution). Thailand embarked on performance
budgeting reforms cautiously. Rather than overhaul the overall
budgeting process, BOB offered to reduce line itemization for spending