Thailand has an intense and complex relationship with water. Water is key to driving the agricultural sector – the principal user of water – and supporting growth in the manufacturing sector. Both of these sectors create water quality challenges through diffuse run-off or point source discharges. Extreme seasonal and regional variations in terms of precipitation pose significant challenges in terms of water quantity, with floods and droughts a persistent threat. This chapter discusses the challenges faced by the water sector and draws links between multi-level governance and regional development issues. Policy recommendations are presented that intend to improve policy coherence and decision making, explore opportunities to increase the use of economic instruments, and take a long-term, risk-based approach to infrastructure development and water security.
Multi-dimensional Review of Thailand (Volume 2)
Chapter 4. Moving towards effective management of water security
Abstract
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
Poor water security will hold back Thailand’s growth plans
Improving water security is key for Thailand’s future prosperity in the face of continuing economic growth and climate change. Availability of sufficient water of sufficient quality at the right time is crucial to Thailand’s ambition to achieve high-income status by 2036. The relationship between water management and the economy is strong, and investments in good water management can be considered as longer-term payback for increased economic growth and poverty reduction.
Thailand faces increasing water risks. An expanding population, continued economic growth and looming threats posed by climate change are expected to make sustainable water management significantly more difficult in the coming years. These challenges can be captured under the overarching theme of “water security”, a term that describes the maintenance of acceptable levels of risk in four main areas: (i) the risk of water shortages, (ii) the risk of inadequate water quality, (iii) the risk of excess water, and (iv) the risk of undermining the resilience of freshwater systems. In the Thai context, water security includes issues relating to floods and droughts, water use and allocation, water quality and the impacts of pollution (OECD, 2013[1]).Water security issues are a prominent feature of day-to-day life in Thailand. The 1 000 Baht banknote features images of high-profile flood defence infrastructure projects, including the Khlong Lat Pho floodgate project, functioning as a constant reminder of the importance of these challenges.
While Thailand is endowed with substantial water resources, it remains vulnerable to significant flood and drought risks. The country receives, on average, 1,374 mm of precipitation per year, significantly higher than the global average of 990 mm (FAO, 2011[2]). However, this rainfall is seasonal and subject to regional disparities, heightening the risks of severe flooding and drought. Natural climatic risks are exacerbated by poorly planned urban expansion, the intensification of agriculture, the deterioration or loss of watershed forests (contributing to floods), water consumption behaviours, agricultural and industrial land development, urbanisation and population growth (contributing to droughts).
Climate change is expected to exacerbate water risks even further. National projections indicate that heavier precipitation is expected in areas that already receive high levels of rainfall, such as the southern peninsula, increasing the potential for flooding. Precipitation is expected to decline even further in the arid, inland Northeast region, increasing the likelihood of drought (ONEP, 2015[3]). According to the Climate Change Vulnerability Index, Thailand is one of 16 countries in the extreme risk category, indicating extreme vulnerability to future climate change impacts over the next 30 years (Apipattanavis, Ketpratoom and Kladkempetch, 2018[4]). The Climate Change Vulnerability Index is released by global risks advisory firm Maplecroft and is one of a number of tools available to organisations to identify areas of risk within their operations, supply chains and investments. It evaluates 42 social, economic and environmental factors to assess national vulnerabilities across three core areas. These include: exposure to climate-related natural disasters and sea-level rise; human sensitivity, in terms of population patterns, development, natural resources, agricultural dependency and conflicts. The index also assesses future vulnerability by considering the adaptive capacity of a country’s government and infrastructure to combat climate change.
With regard to water quality, diffuse and point source discharges are a concern. Wastewater infrastructure is underdeveloped and there is widespread discharge of municipal and industrial wastewater into rivers, resulting in pollution and negative health impacts. Rivers in urban areas, especially the lower Chao Phraya River where Bangkok is located, are polluted from factory discharges. Sources of pollution include pesticides, fertilisers, urban sewage and pharmaceutical residues (Netherlands Embassy in Bangkok, 2016[5]).
The pressures on water security have increased with Thailand’s continued growth. An increasing population and economic, agricultural and industrial expansion, are exerting greater pressure on water systems. Projections find that, by 2027, Thailand will need to secure 5 billion m3 more water to satisfy increasing demand (Apipattanavis, Ketpratoom and Kladkempetch, 2018[4]). In addition to heavy monsoons, the causes of floods include the decline of flood retention and flood plain areas due to urbanisation, industrial development and intensification of the agricultural sector. Water shortages in Bangkok have resulted in the over-pumping of groundwater, which depletes precious supplies and leads to land subsidence, further increasing the risk of floods.
Demand for water in the country’s main economic sectors, including industry and agriculture, is increasing, putting pressure on national water resources. Agriculture, which is the dominant industry and employs three out of ten Thais, is a major water user (Apipattanavis, Ketpratoom and Kladkempetch, 2018[4]), with recent data from NESDB reporting that the agricultural sector accounted for over 54% of all water distributed in 2017. Severe droughts in 2015 and 2016, in particular in the upper-middle part of the country, caused irrigation problems in many areas and had a major impact on the agricultural sector. Losses and water use inefficiencies are known to be high, at times compounding the challenge of water stress.
Regional development and water security are closely linked, with water security challenges impacting the different regions of Thailand in different ways. The Northeast region suffers from regular droughts but also flash floods, while the South is regularly hit by typhoons and floods. As a result, agricultural productivity in these regions (and the Northern region) has been severely impacted in recent years. Heavy industry and manufacturing is located in areas such as Rayong in the East, which creates localised water quality challenges. However, the area is also vulnerable to flooding, as occurred in 2011, with economic damage and losses in the manufacturing sector estimated at USD 32 billion (OECD, 2013[6]). As a result of the floods, a number of international firms relocated to lower risk areas, impacting regional economies in the process.
Thailand needs to move from a crisis response to a risk management approach. The country is typically in crisis management mode, responding to events after they occur. Budget allocations for flood recovery are easier to secure than budget allocations for flood defence and preparation. Embracing a risk-based approach to water management would help facilitate the allocation of funds to projects that add most value to society.
Data and information, cohesive policies, strong leadership, and clarity on roles, responsibilities and decision making are needed to facilitate the move towards a risk-based approach to water security. Thailand lacks a common understanding of the water risks affecting each sector and each region. This has been found to impact decision making on issues including infrastructure planning and development, as well as water quality compliance and monitoring, thereby impeding action. A significant number of actors are involved in water management at both the national and regional level, which further complicates decision making.
Moving to a risk-based approach to water security requires better governance and co-ordination between local and national authorities on water management. The legislative and institutional framework needs to be strengthened, as Thailand currently lacks a single law governing integrated water management. The lack of a shared vision between institutions prevents adoption of national policies and laws, and while national strategy documents and master plans exist, institutional and political issues prevent implementation. Fragmentation in water management results in spill-down effects on other sectors, as well as regional and international markets (Netherlands Embassy in Bangkok, 2016[5]).
Economic instruments, such as water charges, are underutilised and compound water security challenges. Where charges exist, they are typically low. As a result, incentives for users to conserve water are lacking. The ability to finance, invest in and deliver effective water and sanitation services is also reduced. Poor compliance with existing regulations and the absence of financial disincentives to pollute create additional problems (Netherlands Embassy in Bangkok, 2016[5]).
Phase I of the OECD’s Multi-Dimensional Country Review of Thailand found that issues with water security were preventing economic growth and damaging the environment. The policy recommendations presented in this chapter aim to tackle these issues with practical advice and approaches based on OECD experience. The 12th National Economic and Social Development Plan shares some of this analysis and provides important policy suggestions already (Box 4.1).
Box 4.1. The water resources management strategies in the 12th National Economic and Social Development Plan and the contribution of this chapter
The 12th National Economic and Social Development Plan (NESDP) identifies the deterioration of natural resources and environmental quality as an obstacle to sustainable growth. In particular, climate change and natural disasters have become a major concern in Thailand. Specifically, floods and droughts have significant impacts on the Thai economy. To tackle these issues, the Plan envisages polices to improve water security at the national level and to manage the water resources more efficiently.
Water security. The Plan sets several objectives in order to improve water security in Thailand. In particular, it aims at making water supply systems available in every village, improving the efficiency of water for irrigation, industrial and consumption purposes, and reducing the impact of floods and droughts. In this respect, this chapter recommends the adoption and implementation of an integrated risk management approach to water security issues, as well as focus efforts on tackling pollution issues in each water basin.
Water resources management. The 12th NESDP encourages better management of water resources through the design and implementation of resources management plans. The promulgation of the Water Resources Bill envisions the establishment of a National Committee on Water Resources Management with associated watershed committees becoming a key driver of water resources management at the local level. Based on these recommendations, this chapter highlights the importance of multi-level governance to improve efficiency. It encourages pursuing the creation of the National Water Resources Committee and suggests the establishment of a National Policy Dialogue.
Moving from crisis management to risk management will increase long-term water security
Investing in water security will help Thailand tackle regional development issues and strengthen its international reputation. Thailand experiences frequent water-related extreme events, and natural hazards such as floods, typhoons, tropical storms and droughts are expected to increase in the future. Water risks overall are likely to worsen, driven by a combination of climate change and development patterns, and while Thailand is accustomed to living with and responding to these risks, the costs to Thai society and the consequences for development can be considerable. Figure 4.1 shows that annual average recorded damages account for a not insubstantial share of GDP.
Figure 4.1. Annual average damage from flood events as a share of GDP
Note: Annual average damage was calculated based on damage reported between 1971 and 2015 and converted to constant 2015 USD based on the US Bureau of Labor Statistics’ Historical Consumer Price Index for All Urban Consumers (CPI-U). GDP figures are taken from the World Bank for the year 2014 in current USD (http://data.worldbank.org/indicator/NY.GDP.MKTP.CD).
Source: (OECD, 2016[7]) from EM-DAT.
The costs of water insecurity to society highlight the magnitude of the risks. A recent study commissioned by the OECD and the Global Water Partnership (GWP) indicates that water insecurity costs the global economy about USD 500 billion annually, resulting in a total drag on the world economy of 1% or more of GDP (Sadoff et al.[8]). The 2011 floods in Thailand caused a drop in 4th quarter GDP growth of 12%, motivating the Thai Central Bank to cut rates to aid GDP recovery after the floods (Box 4.2 and Haraguchi and Lall, 2015[8] for more details of the impacts of the 2011 floods). The 2017 Allianz Risk Barometer identifies business interruption, including supply chain disruption, as the number one international business risk for the fifth successive year. The Risk Barometer is produced annually and identifies the top corporate perils, and potential solutions. The 2017 report is the sixth version and is based on the responses of more than 1 200 risk experts from over 50 countries. Concern about interruptions in supply chains is seen shifting increasingly towards events that require better risk management of societal and environmental factors (OECD, 2018[9]).
Different regions experience different water risks, potentially deepening existing regional imbalances. The Northeast region suffers from regular droughts as well as flash floods, while the South is regularly hit by typhoons and floods. Heavy industry and manufacturing is located in areas such as Rayong in the East, resulting in localised water quality challenges. Drought will have a more disruptive impact on regions where the primary sector is rain-fed rice production and irrigation canals and water distribution systems are still lacking (Franzetti, Pezzoli and Bagliani, 2017[10]).
Different water risks can increase income disparities. Lower-income groups tend to invest less in water security management and often live in areas characterised by higher water risk (e.g. areas with poor water quality or flood risks). They are thus more exposed to water insecurity and potentially “pay” a higher share of the costs of policy inaction (e.g. health costs) than higher income groups. In addition, water insecurity can marginalise those who lack access to capital (e.g. to invest in well-deepening as a result of falling water tables) (OECD, 2013[6])
Box 4.2. Policy inaction bears considerable risk: Some global impacts of the 2011 floods
The costs of policy inaction can be considerable, not least because water insecurity can have global impacts. This is because local water risks may have an impact on global commodity markets (e.g. a major drought in a food-exporting country drives up food prices worldwide) and disrupt supply chains on a global scale (e.g. the 2011 Thai floods led to the closure of multinational electronics and vehicle industries, with impacts cascading throughout the global economy) (OECD, 2013[1]).
In response to the 2011 floods in Thailand, a number of global companies including Sony and Honda actually relocated from the central province to Rayong province in order to minimise their business risks. Regions that are unable to manage risks are unlikely to be competitive over the long term.
International reputation is also at stake. For example, Thailand is one of the production hubs for global automobile manufacturers, in particular for Japanese automakers. Japanese firms and their family companies account for approximately 90% of sales and exports of automobiles in Thailand. Toyota has reported that they plan to move some of their production to different regions, for example in the United States, in order to change their globally centralised production system to a regionally independent production system. Toyota has also asked about 500 of their suppliers to disclose details of their supply chains. They found that 300 production sites could be vulnerable to risks and requested that these suppliers mitigate risks by introducing measures such as diversifying procurement, securing alternate facilities and increasing inventories (Haraguchi and Lall, 2015[11]).
Moving towards a risk management approach is a three-step process
The OECD publication Water Security for Better Lives provides guidance on how to apply a risk-based approach to water security through a three-step process: “know the risks”, “target the risks” and “manage the risks”. Box 4.3 presents the three-step process (OECD, 2013[6]).
Box 4.3. Moving towards a risk management approach is a three-step process
Know the risks
A frequent significant obstacle to improving water security is lack of knowledge about water risks and their scale. In general, agreement about acceptable levels of water risks is more likely if there is a common understanding of the problem at hand, its causes and its impacts, underpinned by a robust risk assessment. In addition to undertaking scientific and technical risk assessments, governments should take into account the risk perceptions of stakeholders. This promotes transparency and accountability and can contribute to informed public debate about the acceptable level of risk. Acceptance of a particular approach or instrument by stakeholders and their willingness to pay for risk management are strongly linked to their degree of awareness of the water-related risk being addressed. Discussions of risk in water planning should not be dominated by uncertainty about hydrological conditions. Due attention must be given to economic, social, cultural and environmental factors, which can play a more important role than hydrological uncertainties.
A number of countries are taking steps to reduce the risk information gap. For example, flood risk maps are now required in many OECD countries, including in the European Union (pursuant to the 2007 EU’s Floods Directive).
Target the risks
The acceptable level of water-related risk for society should depend on a balance between economic, social and environmental consequences and the cost of amelioration. The limit of cost-effective or practical water management is also an element to consider when evaluating the cost of amelioration. Indeed, completely eliminating risk is often technically impossible or just too costly.
Governments need to undertake systematic assessments of the expected costs and benefits of options in order to manage water risks and properly evaluate risk-risk trade-offs.
Targets for water risks should vary in accordance with different water uses. For example, large dams designed to protect downstream populations might be built to survive a once in 1 000-year flood. Residences and major roads might be built to avoid inundation from a 1:100 year-flood, while minor roads and recreational facilities might only be secured from a 1:10 year flood.
Manage the risks
Allocating water risks among residential, agricultural, industrial and environmental uses raises significant political economy questions. Uncertainty about the values placed by producers and consumers on potential changes in water security can make any systematic effort to compare the costs and benefits of proposed targets complex for both decision makers and stakeholders. A risk-based approach allows risks to be assigned to the actors most likely to be able to manage them efficiently. For example, flood risks may be addressed more cost efficiently through flood insurance or by compensating farmers to convert their land into flood plains, instead of through government investment in the construction of additional levies.
Once set, targets for water risks should be achieved as cost-effectively as possible. When considering which particular instruments to use to meet a given target for water risk – from among direct regulatory measures, market-based instruments and public financial support – an assessment should be made of how each instrument, or mix of instruments, is likely to contribute to the goals of water security and economic efficiency.
Source: (OECD, 2013[1])
In OECD countries, the majority of efforts to date have focused on “knowing” the risk by building the scientific evidence base and disseminating information. Much more can be done to better target and manage water risks in a changing climate. In terms of policy responses, the most widely used approaches are information-based instruments such as flood risk maps, decision support tools for risk management and adaptation guidance for local governments. Thailand has had success in this area with flood risk maps and weather forecast data. However, it is acknowledged that more could be done to share these data with the relevant agencies at all levels of government and to incorporate them into land use planning and decision making. Centralising data on asset performance, asset health and investment needs, in addition to financial information, water quantity and quality data, would support this objective.
A number of tools exist to target and manage risk. Several countries are revising laws and regulations such as sustainable water abstraction limits, building codes, land use planning, and are adjusting economic instruments such as water tariffs, water-related environmental taxes, and flood insurance schemes to reduce baseline stress on water systems, raise financing and address increasing flood risks. Japan has introduced regulations and guidance on land use in disaster-prone areas as well as unified flood control measures, while Australia has introduced water trading to allow scarce water resources to be transferred to ensure maximum productive use and to respond dynamically to changing availability of and demand for water (OECD, 2013[1]; OECD, 2013[6]).
Policy responses are necessarily country specific and are based on risk assessment and broad acceptance of national priorities. Thailand reports mixed performance in this area, while regulatory based tools such as permits for drilling of wells exist, responsibility is often held between a number of agencies, each with their own records, as was seen in Nong Khai province. There is typically no centralisation of data or information, and monitoring and enforcement is inconsistent. In Rayong province, risks of water shortages have been targeted and managed through investment in strategic storage reservoirs with some success.
Once risks are identified and accepted, the next challenge is to finance long-term climate resilient water infrastructure. Some OECD countries still struggle with financing water infrastructure, particularly with the added costs of climate change adaptation. For countries that have taken steps to addressing financing issues, several approaches have been taken. Countries such as Australia, Canada, France and Sweden have allocated dedicated general adaptation funding from public budgets at the national level, some of which is allocated to water. Others (e.g. Germany and the United Kingdom) are mainstreaming adaptation actions into existing budgetary arrangements. Water-related support for adaptation frequently forms part of specific water programmes and projects (e.g. the Delta Fund in the Netherlands and Flood Prevention Programmes in the Czech Republic). OECD countries including Chile, Estonia, Hungary, Mexico, Slovenia and Turkey have received funding from international funding mechanisms (including EU Structural and Cohesion Funds) to advance the adaptation of water systems. Other countries have dedicated funding for general climate change adaptation from national budgets, some of which is allocated to water systems (OECD, 2013[1]; OECD, 2013[6]).
Moving towards a risk-based approach will help prioritise action
Thailand’s response to floods typically focuses on interventions after the event and restoration to the pre-flood situation. Recovery measures need to go further and aim to strengthen resilience ahead of the next disaster.
In order to invest in strengthening resilience, conventional thinking needs to change. For example, budget allocation for flood recovery is currently easier to secure than budget allocation for flood defence and preparation. Thailand is reluctant to “invest in uncertainty” and protect assets against disaster, yet can mobilise resources quickly to recover from events.
Strengthening resilience requires a longer-term view that incorporates climate change impacts. An examination of Thailand’s response to climate change impacts on infrastructure is illustrative of the current gap. Efforts to incorporate resilience into infrastructure decisions encounter barriers characterised by mismatches between rigid funding requirements for infrastructure projects and the uncertainty inherent in climate change projections. As historical climate information is typically used to inform infrastructure planning and design, incorporating climate projections means adding an element of uncertainty, which requires both technical and cultural acceptance. Thailand’s investments in transportation infrastructure are explored in Box 4.4. The business case for investing in long-term resilience is strong and requires communication and cross-ministerial acceptance.
Box 4.4. Considering climate impacts in transportation infrastructure investments
Thailand is in the process of planning ambitious investments in transportation infrastructure, and while sustainability is an element of this plan, an explicit consideration of climate resilience is not. The planned transportation infrastructure project budget for 2017 was USD 25.6 billion. The long-lived nature of infrastructure assets means that decisions made now will lock-in vulnerability if they fail to consider climate impacts. The location of transportation infrastructure can drive development patterns, and has the potential to increase the concentration of people and assets in areas of high flood risk. In addition, the way transportation is built and maintained can increase vulnerability if plans do not account for changing conditions.
Growing climate risks, such as increased high-intensity precipitation events, can have serious implications for transport infrastructure and the communities they serve. Direct impacts include temporary or permanent flooding of roads, damage to bridges and ports, increased maintenance costs due to damage and service disruption. When transport systems fail, they can have far-reaching social and economic consequences, such as preventing access to jobs, schools and hospitals. During the 2011 floods, sections of 1 700 roads, highways and bridges were damaged or destroyed (UNDP, 2012[12]).
Improving the climate resilience of new or existing infrastructure can be achieved by reducing its exposure or sensitivity to climate-related hazards through a wide range of context-specific adaptation responses. A non-exhaustive summary of the impacts of increase extreme precipitation on transport infrastructure and adaptation responses is presented in Table 4.1. Adopting a resilient approach to transportation infrastructure also means accepting that some disruptions are occasionally unavoidable, and minimising the consequences of disruptions when they do occur (ITF, 2016[13]).
Thailand is not alone in these challenges. OECD countries are grappling with ways to include resilience considerations in infrastructure projects. One approach that would work well in the Thai context is layering climate change considerations into existing infrastructure EIA (Environmental Impact Assessment) and SEA (Strategic Environmental Assessment) guidelines. Traditionally, EIA and SEA guidelines have involved assessing the possible impacts, whether adverse or beneficial, that a proposed infrastructure project may have on the environment. In Australia and the Netherlands, the scope has been expanded to examine the impact of climate change on a project (Vallejo and Mullan, 2017[14]).
It is time for Thailand to move to a more proactive approach to water security management, a risk-based approach. A risk-based approach addresses water security first and foremost by determining acceptable levels of different risks in terms of the likelihood that they will occur and the potential economic or other impacts if they do, and balancing this against the expected benefits of improving water security. While it is generally too expensive and often technically impossible to fully eliminate water-related risks, a risk-based approach can help to ensure that the implicit level of risk implied by different policy actions reflects societal values (OECD, 2013[1]).
A risk-based approach allows flexibility and enables the accepted level of risk to be adjusted at relatively short notice should more cost-effective measures to mitigate the risks become available, or if new opportunities for economic development warrant action to further reduce the level of risk. For example, a new housing or industrial development may justify increasing flood defences for a neighbouring river – measures that might not be justified if the land was used instead for agriculture or a natural park.
In practice, however, it is often natural disasters – and not new opportunities – that prompt countries to revisit the acceptable levels of water risks implicit in their policies and measures. For example, countries often revisit flood defence standards following a hurricane or major storm, or address water shortage challenges during or following a major drought. A risk-based approach triggers a move from reactive to more proactive policies. Instead of responding to water crises, which can often entail excessive costs to society, governments can establish a process to carefully assess and manage risks in advance and review them on a regular basis.
Thailand needs to consider the acceptable levels of risk for its different regions and sectors. A number of cities worldwide – including Amsterdam, London and Shanghai – have protection against flood events of a magnitude expected to occur on average only once in 1 000 years. Planning in New York prior to Hurricane Sandy in 2013 protected the city against a one in-a-hundred-year event. This approach was reviewed following the storm, highlighting how cities typically respond after an event.
Setting acceptable levels of water risk should be the result of well-informed policy choices and trade-offs with other related – and sometimes conflicting – security objectives (e.g. food, energy, climate and biodiversity). Such trade-offs occur because policy measures aimed at security or other policy objectives in one area may result in spill-overs in another. For example, objectives to enhance food security can lead to overuse of pesticides and fertilisers, contributing to water pollution. Once set, the acceptable levels of water risks should be achieved at the least possible cost. Economic instruments, such as charging appropriately for water use and pollution, can help to achieve this objective (OECD, 2013[1]).
Water security is about learning to live with an acceptable level of water risk. This requires a better understanding of the risks, ensuring that the level of risk used for planning and policy purposes takes into account social preferences, and managing risks and trade-offs between risks and across water and other policy objectives at the least cost to society.
Improved water security depends upon good governance
Good water management, including water security, is sensitive to and dependent on good multi-level governance. Multi-level governance comprises the interactions between public authorities at national and subnational levels. It influences all policies that rely on the institutions, frameworks and relationships that support decision making and implementation processes between national and subnational levels of government, including subnational development planning. The institutions and actors involved in multi-level governance include levels of government, agencies, parliament, the judiciary, civil society and social partners. Multi-level governance gaps should be identified and considered systemically, as they are deeply interrelated and can exacerbate one another. For example, any country facing a sectoral fragmentation of water roles and responsibilities across public actors (policy gap) may also suffer from conflicting goals which pull the sector in different directions (objective gap). As a result of silo approaches, policy makers may not actively share information (information gap). This, in turn, undermines capacity-building at the subnational level (capacity gap), and local actors, users and private actors have to multiply their efforts to identify key contacts in the central administration. Diagnosing the gaps is a primary step in overcoming obstacles and promoting more effective water policy (OECD, 2012[15]; OECD, 2015[16]).
Many of the management and co-ordination issues observed in Thailand are common in other countries and are typically considered symptomatic of poor multi-level governance. Some 31 actors from central government are involved in water and wastewater management in Thailand. While national strategy documents, including the 12th NESDP, aim to clarify roles and responsibilities for different agencies to drive progress in water management, in practice the link with financial planning is weak, limiting the implementation of strategic objectives. A number of policy tools and responses exist to improve performance in this area. Action is needed on two fronts to strengthen the capacity of state water agencies: the technical and the financial level.
It is vital to improve the technical capacity of state agencies. Their ability to collect and use data and to perform the necessary technical and administrative duties is essential for the interface with water users and other sectors of administration. To build capacities in state agencies requires persistency and continuity. These institutions are often characterised by frequent changes in top management associated with political cycles. Recruitment should therefore be based on professional capacity, with a strong focus on public policy continuity. Attracting and keeping qualified staff and building capacity at the state level is necessary to generate real and viable improvement in water management.
There can be no effective water governance without sustainable funding of the water sector. It is important to implement the use of economic instruments as policy instruments where relevant and needed. Not only do economic instruments generate revenues for state administrations, they can also trigger greater engagement among water users and foster the rational use of water resources. The willingness to pay of the various sectors and the affordability of water bills should be analysed thoroughly and taken into consideration (OECD, 2015[17]).
The OECD’s Principles on Water Governance provide a framework to understand whether water governance systems are performing optimally and to help adjust them where necessary. There are 12 principles to help governments design and implement effective, efficient and inclusive water policies. The first water governance principle is: “clearly allocate and distinguish roles and responsibilities for water policy making, policy implementation, operational management and regulation, and foster co-ordination across these responsible authorities”. This has particular relevance for Thailand (OECD, 2018[18]; OECD, 2015[19]). The OECD Principles on Water Governance aim to enhance water governance systems that help manage “too much”, “too little” and “too polluted” water in a sustainable, integrated and inclusive way, at an acceptable cost, and in a reasonable time-frame. The Principles are rooted in broader principles of good governance: legitimacy, transparency, accountability, human rights, rule of law and inclusiveness and are developed on the premise that there is no one-size-fits-all solution to water challenges worldwide, but a menu of options building on the diversity of legal, administrative and organisational systems within and across countries.
Each country must determine the roles and numbers of entities required to deliver its objectives with regard to water management. A survey of 17 OECD countries in 2010 found that the number of authorities involved in water policy making at the central level ranged from two to 15 (OECD, 2012[15]). Given the regional variations in Thailand with regard to water resource availability, water security and associated governance challenges, a number of relevant lessons might be learned from Brazil’s experience of empowering states to attain a certain level of institutional and technical development in water management. This experience includes the development of national targets and objectives for the water sector and blending them with regional objectives and challenges. Box 4.5 presents the case of “the Pact”, an instrument to better integrate water management between Brazil’s federal and state levels of government.
Thailand needs to examine the roles and responsibilities of its existing entities and map them against its long-term strategic objectives for the water sector. Gaps and overlaps need to be identified and addressed. The 12th NESDP contains a number of recommendations that have the potential to address the key governance issues. This includes the passing of a Water Resources Bill, which clearly outlines the objective of the water sector and maps out roles and responsibilities of the different entities. It is proposed to strengthen the mandate of the cross-ministerial National Committee on Water Resources Management to promote co-ordination and policy coherence, and recommendations to strengthen the role of river basin management. The Committee has been established under the Regulation of the Office of the Prime Minister and bringing it under the Water Bill will increase its authority in the face of competing legislation (Office of the National Economic and Social Development Board, 2017[20]). The 12th NESDP is currently preparing to undergo a mid-term review, which is expected to reveal the extent of the progress made against the wide-reaching targets set in the plan, including improving compliance monitoring and the introduction of the polluter-pays principle.
Box 4.5. A robust policy response to closing water governance gaps: The example of Brazil
The Pact – a flexible multi-level governance contract
Brazil is a key partner country of the OECD and is working to strengthen water resources management at the state level. In 2011, the Brazilian National Water Agency (ANA) launched the National Pact for Water Management, a multi-level governance contract that aims to strengthen the capacity of states to manage water resources in an integrated manner.
As a voluntary-based co-operation agreement, the Pact is a powerful instrument to better integrate water management between federal and state levels. The rationale behind the Pact is that water resources management in Brazil will only improve if the National Water Resources Management System is better integrated with state water resources management systems (OECD, 2015[17]).
The Pact also aims to foster convergence and reduce regional discrepancies across states, while working to establish a “coherent diversity” of state water management systems. Its overarching goals consist of: (i) establishing commitments among federative units to overcome common challenges and lack of harmonisation; (ii) encouraging multiple and sustainable use of water resources, especially in shared river basins; (iii) promoting an effective articulation between water resources management and regulation processes at national and state levels; and (iv) empowering states towards greater capacity and awareness in dealing with water risks.
The programme guidelines are well conceived and robust. They incorporate guidance on strengthening state water resources management systems, commitments to specific targets associated with a vision of the future (prognosis), institutional development based on the aspirations of states and control of targets defined in the contract. All states have embarked on the programme, which underscores the flexibility of the Pact and the general perception that it is adaptable to states at different stages of development.
States were clustered into homogeneous categories according to their degree of water management complexity, in order to better address specific needs in terms of legal, planning, information and operational instruments, human resources and governance. In addition, the Pact included a financial incentive mechanism to accelerate implementation. The mechanism allocated BRL 100 million (approximately USD 27 million) for water management over five years, distributing funds equally to states that reach established goals. Rewards were based on progress in achieving targets rather than on specific outputs (OECD, 2017[21]).
The Pact promotes consistency, integration and dialogue across levels of government, with capacity-building and support to decentralised water policy. Goals set in the Pact contribute to reducing information gaps between federal and state institutions. The Pact reflects the subsidiarity principle, which preserves the autonomy of states while engaging them in a shared responsibility to reach common goals (OECD, 2017[21]). The Pact has no equivalent in OECD countries in terms of comprehensiveness and sophistication. The implementation process is clearly defined and includes specific mid-term and final targets, as well as the delineation of responsibilities and accountability across institutions.
Source: Adapted from (OECD, 2015[16]; OECD, 2017[21])
River basin management has the potential to drive water security improvements in Thailand
Managing water resources at a basin scale is considered good practice, and a number of opportunities and benefits exist to manage water in this way in Thailand. The OECD’s Council Recommendation on Water states that water policies should be set up and implemented based on long-term water management plans, preferably at river basin, or aquifer level (OECD, 2016[22]).
Thailand has invested significant resources in defining 25 river basins and, therefore, needs to determine how best to leverage these structures to drive improvements in water security. Any developments in this area must help address existing governance and fragmentation issues and not increase the burden on current actors in the water sector. At present, there is doubt regarding the benefits of managing water using the basin principle and a general feeling that River Basin Committees – multi-stakeholder bodies that provide oversight for each river basin – are ineffective with no financial mechanisms or authority to contribute to improvements in water management.
Many international actors have converged towards the principle of managing water at a basin scale. Organisations including the Global Water Partnership, the International Network of Basin Organisations and UNESCO have produced guidelines for water management in basins, which typically divide the role of basin institutions into three main functions: (i) monitoring, investigating, co-ordinating and regulating; (ii) planning and financing; and (iii) developing and managing. More importantly, they advise river basin organisations to look at the “big picture” and aim to become the leading voice on basin-wide issues, while keeping constituencies and decision makers in all sectors and at all levels, in both the public and private sectors, fully informed and involved (OECD, 2015[17]). In particular, UNESCO’s recommendations form part of a series of documentation on strategic water management and include recommendations on basin water allocation planning.
The 12th NESDP foresees an enhanced role for river basin management in the future of Thailand’s water sector. This includes driving integrated water management in each basin, the development and implementation of water resources management plans for each basin, and increasing stakeholder participation (Office of the National Economic and Social Development Board, 2017[20]). Analysing the roles and responsibilities of the various actors involved in water management in Thailand presents an opportunity to review the roles of River Basin Committees and the value they add to the water sector. Such committees may be better placed to address or inform governance gaps and identified overlaps through a broad local perspective on water management and water security issues.
Box 4.6 presents some of the functions of basin institutions in Thailand that may add value to and increase water security. There is a clear potential for these organisations to become the voice of water management within a country, representing stakeholder views, understanding local water quantity and quality issues, and developing infrastructure priority requirements.
Box 4.6. A potential role for river basin committees and management in Thailand
Thailand needs to decide how best to leverage advantage from its existing River Basin Committees. The activities outlined below are examples of actions that can be achieved via effective, empowered basin organisations. If used correctly, these may help tackle some of the policy, governance and fragmentation issues seen in Thailand’s water sector today.
Planning and project development
1. Designing plans that are tailored, result-oriented, realistic, forward-looking and coherent with national objectives
2. Co-ordinating across sectors to achieve an integrated approach
3. Co-ordinating levels of government to ensure complementarities and achieve economies of scale across boundaries
4. Involving stakeholders in planning to develop inclusive plans that reflect local concerns
5. Building technical and managerial capacities in subnational institutions.
Finance and budgeting
6. Linking multi-year strategic plans to annual budgets
7. Decentralising fundraising and allocating funds to priority investments
8. Mobilising private sector financing without compromising the long-term financial sustainability of public investment projects
9. Determining appropriate user fees and charges
10. Devising and implementing economic instruments
11. Learning how to deal with the requirements and restrictions of public expenditure, including public procurement.
Implementation
12. Engaging in transparent practices
13. Designing and using monitoring indicator systems with realistic performance-promoting targets.
Evaluation
14. Sharing experiences and conducting rigorous ex-post evaluations
15. Using monitoring and evaluation information to enhance decision making.
Source: Adapted from (OECD, 2015[16]).
Policy coherence and cross-ministerial dialogue is key to the acceptance of policy reforms
While river basins may have a role to play in the future of Thailand’s water management, cross-ministerial dialogue is key to driving policy coherence. For example, discussions with stakeholders in Rayong province indicated tension between the agricultural sector and the growing industrial sector with regard to future water demands. The dialogue exposed water allocation issues and also highlighted the role of water in supporting policies for economic growth. Policy discussion and coherence will become increasingly crucial during the development of Special Economic Zones, including the Eastern Economic Corridor.
Improving water security requires a coherent approach to water policies and other sectoral and environmental policies. In particular, the nexus between water, energy, food, climate and biodiversity presents significant water security challenges and has attracted increasing policy attention in recent years. Increasing the coherence of policies (policy objectives and policy instruments) across these areas is essential if governments wish to meet the range of policy goals, but not undermine water management objectives.
Thailand is in the process of setting up its National Water Resources Committee (NWRC). This high-level committee is chaired by the Prime Minister’s office and supported by a range of high-level officials including Deputy Prime Ministers and the heads of 12 governmental agencies. While a structure for the committee has been proposed, roles still remain to be filled. In particular, the role of River Basin Committees is unclear and the sanitation sector appears to be under-represented. Nevertheless, the NWRC in Thailand has the potential to address some of the policy coherence concerns outlined above.
Box 4.7. National Policy Dialogues as a process
National Policy Dialogues (NPDs) on water are the main operational instrument of the European Union Water Initiative (EUWI) component for Eastern Europe, the Caucasus and Central Asia.
NPDs are policy platforms where stakeholders meet to advance water policy reforms. They are driven by demand from the host countries. A variety of stakeholders participate in the meetings, such as ministries and government agencies and institutions, as well as non-governmental organisations, academia, the business community and parliamentary bodies.
Discussions at NPD meetings are substantiated by robust analytical work and international good practice. For instance, reviews of water pricing benefit from assessments of affordability and competitiveness impacts of alternative pricing scenarios, and development of river basin management plans build on similar experiences in European countries.
The main outcomes are policy packages, such as legislative acts, national strategies, ministerial orders and plans for implementation. These policy packages are then used to support high-level decision making.
Eastern European, Caucasian and Central Asian countries benefit from the ongoing EUWI National Policy Dialogues in many ways, not least through better co-operation with EU Member States. Improved co-ordination with donors on water issues helps to increase the cost-effectiveness of Official Development Assistance provided by EU Member States as well as other donors. Furthermore, NPDs provide opportunities to transfer best practices and knowledge from EU Member States and a number of international organisations (notably, the OECD and UNECE who facilitate NPDs) to beneficiary countries.
Similar processes have been facilitated by the OECD in Brazil, Jordan, Mexico, the Netherlands, the Republic of Korea and Tunisia, to strengthen multi-level governance and support ambitious policy reforms on water pricing, financing or water allocation regimes. National Policy Dialogues consist of iterative and inclusive multi-stakeholder consultation processes which gather information, as well as build consensus on diagnoses and recommendations, and improve buy-in of reforms. They conclude with Action Plans developed to identify concrete options and champions to implement the suggested policy recommendations.
Source: Adapted from (OECD, 2016[23]).
A National Policy Dialogue on water could be an opportunity for detailed inter-sectorial co-ordination and analysis to support high-level decision making (Box 4.7). The OECD has experience of facilitating these platforms in both OECD and non-OECD countries. Key outcomes typically take the form of evidence-based policy packages oriented towards practical implementation.
Better use of economic instruments can improve water security
Policy interventions to manage water risks and facilitate trade-offs between different risks need to draw on the full range of policy instruments at the disposal of governments. These include traditional command and control instruments such as regulations, standards and permits, as well as economic instruments including taxes, charges and tradable quota schemes (OECD, 2013[6]).
Economic instruments provide an opportunity to change the behaviour of consumers and key sectors and to raise much needed financing for the sector. By changing incentives through the use of price mechanisms, economic instruments can better signal the value of water among competing uses, including for environmental purposes (Box 4.8).
Box 4.8. EU conditionalities as an approach to align investment in water infrastructures with water policy compliance
Making funding of water infrastructure investments contingent on compliance with key legislative requirements can foster compliance with national policies. Through its funding programme for the period 2014-20, the European Union supports the implementation of water-related policies and legislation by providing financial incentives to member countries, applying ex ante conditionalities that member countries must fulfil in order to qualify for the provision of such financial support. This ensures that investments are coherent and consistent with EU legislation and policies. If ex ante conditionalities are not met, the European Commission can suspend any payments in their support. Water-related investment under funds intended for water-related programmes and projects to support regional development are subject to an ex ante conditionality and a number of criteria that relate specifically to whether member countries satisfy the most essential requirements of EU water legislation. Requirements applicable to all water-related programmes include the existence of:
compliant river basin management plans
compliant water-pricing policies
a relevant monitoring network
compliant environmental objectives and use of exemptions
a summary of the programmes of measures that will deliver the objectives set.
Similarly, funds intended to support rural development are subject to an ex ante conditionality related to payment of support for investments in irrigation systems, concerning:
the creation of a water-pricing policy that recovers environmental and resource costs
the existence of a river basin management plan for the basin concerned
the use of water metering
a minimum requirement for water savings.
To be fair and effective, conditionalities should be attached to outcomes under the control of the parties, and cannot be affected by third-party failure. For example, farmers are most likely eligible to receive funding to meet environmental requirements, provided they comply with obligations incumbent on themselves, independent of whether their local public sector bodies comply with their obligations.
Source: Adapted from (OECD, 2015[16])
The use of economic instruments throughout Thailand is inconsistent and is not necessarily aligned with key policy objectives. Raw water is charged based on a national tariff from the 1940s, potable water is charged at very low levels defined on volumetric rates set by the utility providing the service, and wastewater services are typically free for the majority of the population. Where wastewater charges do exist, collection rates are often low. The Metropolitan Waterworks Agency, which provides potable water to Bangkok and its environs, charges for potable water based on a tariff established in 1999 (Table 4.2).
Thailand has an opportunity to review and update its water tariffs. When the typical tariff for drinking water for residential consumers in the Bangkok Metropolitan Area of Thailand is considered against the typical water tariff charged in OECD countries, the opportunity to assess and potentially update tariffs is clear. Such an assessment would determine the cost of service and undertake an analysis of affordability. For the purposes of illustration, data collected from OECD countries which shows Thailand at the lowest end of the range is displayed (Figure 4.2).
Table 4.2. Water tariffs charged by Bangkok’s Metropolitan Water Agency (WMA)
Note: MWA is charged for raw water at a rate of USD 0.005/m3. This charge is levied by the Royal Irrigation Department based on a tariff originally set in the 1940s. MWA clean the raw water and sell it to consumers based on a tariff set in 1999.
Source: Bangkok MWA annual report 2017.
While it is an opportune moment for Thailand to consider how to strengthen existing and introduce new water and wastewater charges, the reform journey remains technically and politically challenging. The 12th NESDP indicates a desire to enhance the use of economic instruments. The plan describes “collecting wastewater treatment fees to cover the costs of operation and maintenance (O&M)”; “creating incentives for behavioural change towards sustainable consumption of water”; “conducting a study to identify proper and fair fiscal measures, following the Polluter Pays Principle, prior to putting it into effect”. Technical challenges include establishing customer registers and collection mechanisms, while political issues focus around affordability for vulnerable customers and strategies to address sectors such as agriculture. Table 4.3 presents the enabling steps that Thailand should evaluate before considering reform of its existing economic instruments.
Recent OECD experience in the Republic of Korea considered reform of economic instruments and identified a number of prerequisites ahead of introducing reform. These included multi-stakeholder buy-in as a result of a nationwide consultative process; clear communication regarding the objective of the charge, and transparency in the design of the charge and the use of collected revenues; and action to ensure that the opportunity costs of using water and the scarcity risks are clearly reflected in the charge (OECD, 2017[24]).
Figure 4.2. The unit price of water and the cost of sanitation services to households are higher in OECD countries than Thailand
Note: The volumetric tariff for Thailand was set in 1999. OECD country unit prices are taken from a survey dated 2007-08. The data is presented in its raw form and is not corrected for PPP.
Source: Adapted from the OECD webpage “Water – The right price can encourage efficiency and investment” (accessed June 2018) and the Bangkok Metropolitan Water Agency Annual Report 2017.
When reviewing its use of economic instruments, Thailand must consider the existence of any subsidies that may have a negative impact on water security or be misaligned with the over-arching objectives of the water sector. More coherent policy approaches are slowly beginning to take shape in a growing number of OECD countries. For example, agricultural policy reform over the last 20 years has, in part, removed policy inconsistencies and helped to address water risks from agricultural activities. However, much more needs to be done including by exploiting potential win-wins (e.g. taking steps to increase both water and energy efficiency). Energy policies to enhance food security can have negative spill-over effects on water. For example, electricity subsidies to farmers for the pumping of groundwater can adversely affect the sustainability of groundwater resources (OECD, 2013[1]).
Policies that impact water, energy, agriculture and the environment are often formulated without sufficient consideration of their inter-relationships or their unintended consequences. The siloed nature of many government approaches to policy development in different areas is the key contributor to this incoherence. This translates into differences in temporal scales between energy, agricultural and water policy objectives (e.g. forward-looking water plans are often developed around a 50-60 year horizon, while energy plans look up to 20-30 years ahead, and agricultural planning generally adopts a much shorter time horizon).
Table 4.3. Enabling steps for developing water charges in Thailand
Source: Adapted from (OECD, 2017[24])
The economic distortions caused by the frequently vast under-pricing of water used in agriculture have been compounded in many instances by agricultural policies, particularly those linked to the production of particular commodities. Such linked support draws resources, including water, into the activity in question, thereby driving up the price of water for other users and the volume of agricultural subsidies. For example, Thailand recently had to abandon a minimum price scheme for rice that may have distorted farmer incentives to grow more resilient crops. As a rule, farmers have free access to (or are charged only a nominal fee for) water that they pump themselves. Several countries continue to offer preferential tariffs for electricity used to pump water for irrigation (OECD, 2018[25]).
In Thailand, decisions over agricultural policies, which are often linked to trends in the export market, have a significant impact on water management. For example, in Rayong province a recent trend to move away from growing rubber to the more water-intensive fruit durian has doubled water consumption in certain areas. This policy has had a direct impact on water availability and creates pressure when resources are scarce. In addition, if trends are not well managed they can lead to oversupply of certain products, thereby impacting prices and further reducing the economic value of the irrigation water used.
The appropriate use of economic instruments, particularly when implemented in conjunction with other policy instruments, can transform water sector performance. Box 4.9 presents a case study from Israel where appropriate pricing of water supported long-term water security objectives and promoted innovation within the sector.
Box 4.9. Appropriate pricing of water can drive water security objectives, change user behaviour and promote innovation
Agricultural water pricing in Israel
Due to increasing water scarcity, water prices in the agricultural sector in Israel have risen 100% over the past decade. This increase in prices led to substantial changes in agricultural practices including a move to drip irrigation, the adoption of more appropriate crops, the removal of water-intensive trees and replantation with water-saving types, and increase in the use of recycled and desalinated water sources. As a result, agricultural water demand has declined significantly; desalinated and recycled sources of water now make up around 50% of irrigated water use. Despite the significant decline in agricultural water use, efficiency gains have meant that agricultural production has actually increased. Furthermore, higher water prices and increased use of alternative water sources have stimulated technological innovation and exports of water technology grew by 21% in 2006 and 28% in 2007.
Source: (OECD, 2013[1])
Policy recommendations
References
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