Educational Finance in Thailand - UNESCO Bangkok

Final Report, Volume II/3 Anthony. Cresswell: Educational Finance UNESCO-PROAP TA 2996-THA
Education Management and Finance Study July 1999
governments by taking advantage of resources available in private capital markets.
This would also establish prices for the construction projects at the prevailing
rates in the capital markets, and match the time frame for payment more closely to
the time frame for receiving the benefits of the expenditure. These features would
impose a more rational framework on capital investments decisions. In addition,
the full financial responsibility for capital construction projects would lie with the
government units closer to the assets and their use, and thus in better position to
make investment decisions and to manage asset use and proper maintenance.
c. Another advantage of financing capital construction through borrowing in
private capital markets is to insulate long-term capital investment decisions and
construction projects from the effects of short-term budget problems. Discussions
with administrators about the impacts of the economic crisis included descriptions
of decision strategies that illustrate the need for such insulation. One common
response to the economic crisis was to cut back severely on capital projects, both
new initiatives and ones under development. When capital construction is
financed through current revenues, this is a reasonable and effective strategy to
achieve short-term savings. But there are several deleterious effects of such a
strategy. Construction activity typically has a strong multiplier effect. So cutting
sharply on construction spending can exacerbate recessionary trends. More
important, perhaps, is a kind of "opportunity cost" involved when the large
amounts of discretionary construction funds provide for relatively easy short termbudget
reductions. The government loses the "opportunity" (or necessity) to
review structural inefficiencies or institute innovations that might produce even
greater savings over a longer term. In addition, suspending construction involves
costs as well. These can include deterioration and related loses from partially
finished structures, penalties for disruption of contractual commitments, and
disruptions of programs due to the absence of planned facilities.
3.2.3.5 Supply-side versus demand-side finance of education
a. There has been much discussion of what has come to be called "demand-side"
as opposed to "supply-side" financing of education. The apparent issue involved
in this discussion is whether the flow of resources to education should be
determined by or controlled by the "supply-side" (i.e., the suppliers of education,
schools and their administrative structures), or the "demand-side," (i.e., those
demanding educational services, parents and students). In this discussion, the
current state of education in Thailand is characterized as dominated by the
"supply-side," i.e., the government providers of schooling. Any reforms
undertaken should increase the responsiveness of the schools to the "demand
side," i.e., the consumer. This would presumably improve quality as well. It is also
implied, though not necessarily stated, that the amount and types of schooling
supplied should more closely match demand. It is also argued that the demands of
the consumers will lead to more effective or more rapid reforms as well.
b. These demand side initiatives in other countries have taken the same form as
many of the reform initiatives in progress in Thailand: targeted subsidies,
vouchers, student loans, community grants, and other forms of public assistance to
private schools. Demand side financing has also used stipends directly to students
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