Diverse Models of Macroeconomic
Coordination in East Asia
--Thailand, Malaysia and the Philippines--
Policy Formulation in Developing Countries
GRIPS Development Forum
Highlights
1.
2.
3.
4.


Critical role of central economic agencies
(CEAs) in the development process
Country contexts: macroeconomic and aid
management in Thailand, Malaysia, and the
Philippines
Diverse models of CEA macroeconomic
coordination in three East Asian countries
Synthesis
Thailand and Malaysia (esp. 70-80s): mobilizing resources
and organizing for development
The Philippines (late 80s-): renewed effort for CEA building
after democracy restoration in 1986
1. Critical Role of Central Economic
Agencies (CEAs)
<The Case for Central Administration>
 Policy coordination in the presence of
scale economies
 Inter-jurisdictional externalities, with
spillover effects across localities
 Support to local administration
-- Complementary to decentralized administration
-- Providing the enabling environment for private
sector development
Critical Role of CEAs
<“Developmental” Role of CEAs>
 Agent of managing the transformative,
development process (Leftwich 1995)


Strategic core centers



Additional dimension to Weber’s modern, rational
bureaucracy
Aligning policy planning and resource mobilization toward
attaining strategic priorities
Coordinating different interests of various stakeholders
-- domestic and external (incl. donors)
-- vertically and horizontally
“Developmental coalition” with leaders
Critical Role of CEAs
<Key Perspectives>
 Coordination mechanisms of central
economic agencies (CEAs)




Role of Development Plan (DP) in policy and resource
planning, alignment functions;
Budget and public investment planning;
Aid management
Key actors affecting CEA functions: the role
of leadership, technocrats, etc.
Coordination Mechanisms of CEA
Policy & resource planning,
alignment functions
Key actors affecting
CEA functions
Vision
Political will
Leader
Development plans
Priority policies
Macroeconomic mgt.
Utilize
Aid
Public
Investment
selection
CEA Technocrats
Donors
Budget
Private &
non-govt.
stakeholders
Resource
allocation
Private &
non-govt
activities
Ministries
Implementation, Service delivery etc.
Other state
organs
Local
govt.
Alliance between Leadership and
Technocrat Team in East Asia
Leadership
Type
Technocrat
Teams
Japan
(late 50s70s)
Organizational
leadership
MOF, EPA, MITI
(super-ministry
for industrial
policy)
S. Korea
(60s-70s)
Strong personal EPB (superleadership
ministry)
5-year plans and plans
for targeted industries
Malaysia
(80s-90s)
Strong personal Prime Minister’s
leadership
Dept. esp., EPU
(super-ministry)
Vision 2020, 5-year
plans; and Industrial
Master Plans (IMP)
Thailand
(80s)
Organizational
leadership
5-year plans; no
industry-wide plan
(except after financial
crisis)
Core macroeconomic
agencies (no
super-ministry)
Development &
Industrial Vision
Formulation
Economic and physical
plans for vision sharing;
industry-specific policies
Japan (late 50s-70s): Development and Industrial
Vision Formulation

Prime
Minister

- MLT Economic Plans
- Comprehensive National
Development Plans
(physical planning)
Deliberation
Councils
PM’s Office
Econ. Planning
Agency, Land
Agency, etc.
Participation from
officials, business,
academia, media,
labor, consumers.


MOF
MITI
Deliberation
Councils
- Industrial vision
- Industry-specific policies
- Coordination & support
to business activities
(e.g., finance, technology)
Organizational
leadership
No single superministry
Govt. formulating
MLT economic and
physical plans via.
deliberation
councils
MITI serving as
super-ministry for
industrial policy
South Korea (60s-70s): Development Vision and
Govt.-Business Partnerships

President
(Blue House)
Economic
Secretariats

State Council
Chaired by Deputy PM
Five-year plan
Economic Minister’s
Council
EPB
Deputy PM
KDI
- Policy analyses

- Development planning
-
Public investment planning
Budget
Monitoring
Aid management
Govt.-Business
Meetings:
- Export promotion
- Economic briefs
- HCI drive, etc.


MCI
Ministries/Agencies
Business Finance
Direct presidential
control over
economic policies
EPB as superministry
Research institute
(KDI, etc.),
providing analysis
for MLT economic
policies
Govt.-business:
very close &
cooperative
relations
Performance-based
rewards &
penalties
2. Country Contexts: Macroeconomic
and Aid Management
<Socio-Economic Indicators>
GNP
per capita ($)
Annual growth
rate (%)
per capita
GNP avr.
1965-90
Poverty ratio
(%)
1980-90
avr.
1976
1990
South Korea
670
5400
7.1
16
Malaysia
860
2300
4.0
27
Thailand
380
1420
4.4
30
The Philippines
410
730
1.3
58
Sources: World Development Report (1976, 92, 93) and Human Development Report (1992)
Country Contexts: Macroeconomic
and Aid Management
Thailand
 Strong
fiscal discipline; prudent debt
management
 Active, but selective use of aid; changes
in aid mix and “graduation”
Malaysia
 Fiscal
The Philippines
 Problems
activism to support large
development expenditures; overall
balanced economic management
 Selective use of aid; changes in aid mix
and “graduation”
of allocative efficiency; heavy
debt burden constraining development
expenditures
 Active use of aid continuing; selectivity?
Key Fiscal Indicators： Thailand
Thailand (consolidated central government)
Domestic Debt (right axis)
Foreign Debt (right axis)
Total Revenue and Grants
Current Expenditure
Capital Expenditure
Over-all Deficit/Surplus
Source: IMF Government Finance Statistics Yearbook 1983, 1990, 1996, 2002.
GDP data are based on IMF International Financial Statistics 1992, 1997, 2004.
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0.0%
1984
-20.0%
1983
20.0%
1982
-10.0%
1981
40.0%
1980
0.0%
1979
60.0%
1978
10.0%
1977
80.0%
1976
20.0%
1975
100.0%
1974
30.0%
1973
120.0%
1972
40.0%
Key Fiscal Indicators： Malaysia
Malaysia (cosolidated central government)
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0.0%
1984
-20.0%
1983
20.0%
1982
-10.0%
1981
40.0%
1980
0.0%
1979
60.0%
1978
10.0%
1977
80.0%
1976
20.0%
1975
100.0%
1974
30.0%
1973
120.0%
1972
40.0%
Domestic Debt (right axis)
Foreign Debt (right axis)
Total Revenue and Grants
Current Expenditure
Capital Expenditure
Over-all Deficit/Surplus
Source: IMF Government Finance Statistics Yearbook 1983, 1996, 2002 and ADB Key Indicators of Developing Asian
and Pacific Countries 2003.
GDP data are based on IMF International Financial Statistics 1992, 1997, 2004.
Key Fiscal Indicators： The Philippines
Philippines (consolidated central government)
Domestic Debt (right axis)
Foreign Debt (right axis)
Total Revenue and Grants
Current Expenditure
Capital Expenditure
Over-all Deficit/Surplus
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0.0%
1984
-20.0%
1983
20.0%
1982
-10.0%
1981
40.0%
1980
0.0%
1979
60.0%
1978
10.0%
1977
80.0%
1976
20.0%
1975
100.0%
1974
30.0%
1973
120.0%
1972
40.0%
Source: IMF Government Finance Statistics Yearbook 1983, 1990, 1996, 2002 and ADB Key Indicators of Developing Asian and
Pacific Countries 2002.
GDP data are based on IMF International Financial Statistics 1992, 1997, 2004.
3. Overview of CEA Macroeconomic
Coordination Mechanisms
<Points>
 What are the role and functions of CEAs in
three East Asian countries?
 How have macroeconomic coordination
mechanisms worked?
 What are key actors (incl. the relationship
btw. political leaders and technocrats)?
 What is the role of development plans (DPs)
in policy and resource alignment (i.e., budget,
public investment selection, aid)?
 What are implications for building CEAs?
Comparison of Macroeconomic Coordination
Mechanisms by CEAs in Three Countries
Thailand
Malaysia
The Philippines
(esp.70s-80s)
(esp.70s-80s)
(late 80s-now)
Role of CEAs in
Strategic core
development mgt. centers
Strategic
Features of
macroeconomic
coordination
Centralized,
Centralized,
Role of DPs
Guiding
policy
alignment with
development
priorities, under
annual fiscal
scrutiny
Guiding
Enforcement of
macro-guidelines
Comprehensive
Comprehensive
but
responsibility
shared among
core economic
agencies
Subtle check &
balance
(incl. ODA, SOEs)
centers
core
under
super-ministry
(EPU)
Multi-layered,
rule-based
coordination
Strategic
centers?
core
“Dual
track” (the
executive vs. the
legislature)
Insufficient,
inter-agency
coordination
policy &
Limited policy &
resource alignment resource
with development
alignment with
priorities
DPs
DPs as action plan
to achieve LT vision
(incl. ODA, SOEs)
Limited,
with
exemptions
3-1. Thailand: CEA Functions and
Key Actors

Centralized power in the core macroeconomic
agencies





Leadership: empowering technocrats to plan
and administer economic policies


NESDB (National Economic & Social Development Board):
PM’s Office
BOB (Bureau of the Budget): PM’s Office
FPO (Fiscal Policy Office) + PDMO (1999-): MOF
Bank of Thailand: central bank
Technocratic insulation from political interventions
Role of CEA technocrats


Strong inter-agency coordination; shared responsibility
Enforcing legal limits for fiscal deficits and external borrowing
(But, sector-level coordination not necessarily strong)
Thailand: macroeconomic coordination mechanism
Prudent macroeconomic management as a whole

DP alignment
BOB
•Planning
•Public investment
•Development budget
•Budgeting
(investment &
recurrent)
FPO
DTEC/
TICA
•Technical assistance
•Fiscal policy
Vision
Figure
NESDB
Central
Bank
PDMO
(1999-)
•Public debt
management (including
foreign loans)
Prime
Minister
•Monetary policy
Delegate
authority to
plan and
administer
policy
Thailand: Role of DP in Policy and
Resource Alignment


Indicative DPs, without budget implications
Development priorities clearly indicated in DPs



Flexibility in medium-term planning, while
scrutinizing all projects in the annual budget &
debt approval decisions



ODA utilization strategy included (esp. 60-70s)
Eastern Seaboard Development Plan (esp. 80s)
BOB “mobile units” providing vertical link to line agencies,
through the annual budget process.
National Debt Policy Committee; National Committee on
State Enterprises.
Consultation with the private sector (from the
70s, strengthened in the 80s)
3-2. Malaysia: CEA Functions and
Key Actors

Centralized power in Prime Minister’s Dept.
(EPU as super-ministry)





EPU (Economic Planning Unit): PM’s Dept.
ICU (Implementation Coordination Unit): PM’s Dept.
MOF (Ministry of Finance) and Central Bank
Strong political leadership, providing longterm visions and direction for changes
Role of CEA technocrats


Technical arms to realize PM’s visions (esp. New Economic
Policy or Bumiputra policy in the 70-80s)
DPs and budgets as rolling plans to achieve long-term visions
Malaysia: macroeconomic coordination mechanism

macroeconomic
management
DP Balanced
alignment
Figure
•Budgeting (investment
& recurrent)
•Fiscal policy
•Public debt management
(including foreign loans)
EPU
Prime
Minister
Vision
Technical
support arm
to realize
PM’s vision
•Planning
•Public investment
•Development budget
•Development assistance
MOF
Central
Bank
•Monetary policy
ICU
•Project monitoring
Malaysia: Role of DP in Policy and
Resource Alignment


Directive DPs, with budget implications
Development priorities and resource allocation
clearly indicated in DPs




Multi-layered, inter-agency coordination for
planning and implementation to ensure
coherency



Enforcing budget and sector ceilings for the plan period, while
adjusting at mid-term review
New Economic Policy as overarching priority (esp. 70s-80s)
ODA utilization strategy included in DPs (from the 60s and
later expanded as int’l cooperation strategy)
National Planning Committee, National Action Committee (as
apexes); “top-down” and “bottom up” coordination
Role of the “planning cells” technocrats -- macro-sector links
Consultation with the private sector: e.g., annual
budget dialogue (from the 80s)
3-3. The Philippines: CEA Functions
and Key Actors

President-led NEDA Board: major reform since
1987 EO230





Cabinet-level, inter-agency coordination bodies
(incl. Development Budget Coordination
Committee)



NEDA (National Economic & Development Authority)
DBM (Dept. of Budget Management)
DOF (Dept. of Finance)
Central bank
Effort to synchronize DP, Public Investment Plan (PIP), and
annual budget; MTEF introduced in 2003.
Effort to strengthen supervision of GOCCs (Govt. Owned and
Controlled Corporation), esp. on budget and debt approval.
“Dual track” system: executive vs.
congressional channels
The Philippines: macroeconomic coordination mechanism
Dual
track

Legislature
DP alignment
Figure
Intervention
(especially during budget process)
Executive branch
President
NEDA Board Cabinet level interagency committees
•Planning
•Budgeting
•Public investment
•Regional development etc.
Vision?
DOF
•Public debt
management
(including
foreign loans)
DBM
•Budgeting
(investment
& recurrent)
NEDA
Central
Bank
•Planning
•Monetary policy
•Public investment
•Development budget
•Development assistance
Other relevant
Departments
The Philippines: Role of DP and
Macroeconomic Coordination Features

Limited role of DPs in policy planning and
resource alignment



Weak enforcement of macroeconomic guidelines




No budget ceilings for DP and PIP
Strategy for ODA utilization and private sector collaboration
unclear (until recent DP)
Large GOCCs exempted from ceiling of Foreign Borrowing Act
Vigorous appraisal and monitoring procedures, applied only for
ODA and BOT projects
Congressionally initiated projects (“pork barrel” funds) outside
the regular budget process
Congressional interventions in the annual budget
process, undermining the Executive efforts of
DPs-PIP-budget synchronization
4. Synthesis

Importance of strengthening CEAs as
strategic core centers of development
management



Forming “developmental” coalition between leaders
and technocrats
Imposing developmentally-driven rules governing
economy
Diverse models of macroeconomic
coordination in three East Asian countries


Institutional variation for CEA design and
coordination mechanisms
Need to take account of the local context when
building CEAs
Synthesis

The Philippines:




Building “formal” institutions is not sufficient to
ensure their effective operations.
Importance of the political environment, often
challenging nationwide consensus-building
Role of aid? – enclave, or an entry point for the
broader institutional reforms?
Thailand and Malaysia:

Despite differences, they share common
“functional” principles to make CEAs function
as strategic core centers
Synthesis: Thailand and Malaysia
<Differences>
 Leadership style and operating principles of
CEAs
 Degree of DPs binding medium-term resource
allocation and project selection
<Similarities – “functional” principles>
 The content of DPs is strategic enough to
serve as the core document for policy
alignment
 Comprehensive enforcement of macroeconomic guidelines
Synthesis: Thailand and Malaysia



Good inter-agency coordination to ensure
policy and resource alignment with
development priorities -- within CEAs, plus
between CEAs and line agencies
Commitment and capacity to use ODA, as
integral part of the development planning,
budget and investment programming
processes
Strong alliance between political leadership
and CEA technocrats around “shared visions”
Topics for Discussions
What are the types of macroeconomic
coordination in your country?
 What is the role of DPs in policy planning
and resource alignment in your country?
 How and to what extent there exists
“developmental” coalition between political
leaders and CEA technocrats in your
country?
 What are factors contributing to, or
preventing the above coalition building?

The END