The Kingdom of Thailand has achieved remarkable economic development over the last 6 decades. It aspires to become a high-income economy by 2037, as outlined in its 20-year national strategy. In order to achieve these objectives, the government is developing new growth hubs, starting with the Eastern Economic Corridor (EEC).
Water security and disaster risk management are requisites for this ambition to materialise. Considering Thailand’s contribution to a number of global value chains, success in these areas have a global significance.
However, several water challenges coexist such as competitive increase in water demand in agriculture, industry and service sector; deterioration of water quality due to increasing pollutants; deepening damage from floods and droughts due to climate change - Thailand is recognised as highly vulnerable to climate variability and change - and management of rivers and aquifers shared across regions.
In that context, the Thai government embarked in a policy dialogue on water, supported by the OECD, the Asia Water Council and the Korean Ministry of Environment. The dialogue focused on two sets of issues: managing water demand in the Eastern Economic Corridor and financing water supply and sanitation. The first one is essential to support rapid economic growth in the region. The second contributes to better livelihoods and increased water quality nation-wide. Success in both areas can build on recent developments, but also require significant adjustments in water policies and policies that affect water availability and demand.
Water supply in the EEC is ensured through a complex system of reservoirs and distribution lines across the region and neighbourhood provinces. The long-term forecast for the Eastern region indicates that the area is exposed and vulnerable to climate change. Rising sea levels can also introduce new, or exacerbate existing, saltwater intrusion into freshwater resources. Both groundwater and surface water sources are at risk. The dialogue highlighted that enhanced water security in the EEC would benefit from supplementing water supply augmentation (already locked in development plans) by a range of measures, combining robust water allocation regimes, stimulating demand for reclaimed water and fair compensation for provinces which water is diverted to augment supply in the EEC. The diffusion of a range of smart water technologies would seem appropriate in that context.
Allocation regimes in the EEC would benefit from robust data on water use and availability – the One Map programme goes in the right direction - on which to build licences to abstract water (including for agriculture) and related economic instruments; licences should also factor return flows in. In addition, a thorough definition – and enforcement - of environmental flows would contribute to water security and other benefits.
Access to water supply and sanitation has steadily improved in Thailand. However, in 2020, only 26% of the population was using safely managed sanitation services and only 24% of the wastewater flow was safely treated. This situation contributes to water pollution and to raising costs to use water. Additional investment is required to collect and treat wastewater and to address further cost drivers, including population growth and urbanisation, economic growth (and raising social expectations) and the need to adapt to a changing climate. It is not clear how these drivers are reflected in Thai plans to extend coverage and improve quality of service, in both urban and rural settings.
To cover such investment needs, number of requisites need to be in place. The first is operational efficiency of existing services, a condition to efficient allocation of (public and private) funding, willingness to pay of domestic water users, and minimising financing needs in the future (avoiding rapid decay of existing assets). Economic regulation has a role to play: systematic benchmarking of the performance of service providers can be the basis of tailored incentives towards operational efficiency. International experience can inspire the selection of performance indicators and the design of incentives, including through performance-based contracting. Smart water technologies can support such an endeavour.
When the enabling conditions are in place, blended finance can play a critical role in mobilising the commercial finance required as well as strengthening the financing systems upon which water–related investments rely. Commercial finance is all the more relevant when public finance is constrained. Thailand is no exception in this domain: in the aftermath of the pandemic, the debt-to-GDP ratios of most Emerging Asian countries are expected to continue rising in 2022; calls from across society for measures to address longer-term challenges such as climate change – which essentially translates into water issues - will also lead to continued demands on government spending. This puts further constraints on public finance. More work is required to assess whether the enabling conditions are in place. The prospects are promising as private investment in the water sector could benefit from Thailand’s track record in investment attraction, and proactive investment promotion and facilitation policies under a strong Board of Investment.
Partners in the water dialogue acknowledge that some needed reforms are sensitive and challenging: water allocation regimes, standards and incentives for reclaimed water, the enabling conditions to attract commercial finance for water supply and sanitation investments. The OECD, the Asia Water Council and the Korean Ministry of Environment stand ready to further collaborate with ONWR and Thai authorities to move further ahead and make water a driver for sustainable growth in Thailand.