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Evolving water policy in the Bangkok metropolitan region Kraisoraphong, Keokam 1994

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EVOLVING WATER POLICY IN THE BANGKOK METROPOLITAN REGION by KEOKAM KRAISORAPHONG B.A., Chulalongkorn University, 1985 M.Sc, Japan-America Institute of Management Science, 1986 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in THE FACULTY OF GRADUATE STUDIES (Resource Management and Environmental Studies Programme) We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA August 1995 (c) Keokam Kraisoraphong, 1995 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. (Signature) Department of &ESV/SCc MAhA<3>£M€tiT f ENVIRON MENTAL STUdiB The University of British Columbia Vancouver, Canada Date AUGUST 111>S DE-6 (2/88) ABSTRACT The study focuses on the problems of water allocation in Thailand where the alternative of introducing a comprehensive water-pricing system has become a controversial issue. Governed by the regime of open access, the Thai water allocation system has failed to cope with newly surfacing demands and necessities. The system has yet to overcome old perceptions and habits. The case studied is the Bangkok Metropolitan Region (BMR), the area of greatest social-economic changes and most acute water allocation conflicts in Thailand. Proposals to shift water allocation decisions from the government to the market by way of water-pricing have not been well received by the government as a result of political uncertainty. While the government is in favour of increased centralization to improve its administrative control, the academic circles are calling for institutional reforms which would include specifications of property rights to water. As a contribution to the area of Thai water management, this study examines water resource issues in relation to the water demand profile of the BMR, the issue of property rights and water allocation, the historical development within Thai political economy, the trends that shape possible changes within the policy arena and how these changes can positively affect water allocation systems in Thailand in terms of pricing. The study is based on reviews of relevant theory, interviews and analysis of both published and unpublished data on the BMR. Water issues in the BMR revolve around problems of water shortage, groundwater over-extraction, and deteriorating water quality. The demand profile indicates that the existing ii water allocation system is not able to sufficiently accommodate the BMR's water demand, neither in quantity nor in spatial distribution. The state's centralized administrative control has failed to provide an efficient and equitable system for water allocation. Solutions currently being proposed follow one of three alternatives: increase state centralization to correct administrative errors, conserve and revive traditional systems, or introduce market-based tools such as a water-pricing. The study suggests that there needs to be a shift in government policy to develop a mechanism whereby water allocation and management recognize the significance of local community inputs as represented by interest groups. iii TABLE OF CONTENTS ABSTRACT ii LIST OF ILLUSTRATIONS vii LIST OF ABBREVIATIONS viii ACKNOWLEDGEMENT ix Chapter Page 1 INTRODUCTION 1 Objective of the Study Worldwide Problems with respect to Water Water Issues from a Global Perspective Implications from Water Issues The Study 2 RELEVANT THEORIES 22 Literature Review Theoretical Framework for the Study Water Demand Management Water Pricing Property Rights 3 THAILAND: WATER-RELATED ISSUES 84 Thai Water Management Structure: Agencies Involved Water Demand Situation in the BMR The Problems and Related Issues IV Chapter Page 4 THAILAND'S WATER-RELATED LEGAL 106 AND ORGANIZATIONAL STRUCTURE Administrative Structure of the BMR Government Institutes Related to Water Sevices Planning and Measures Taken Obstacles to Implementation Future Trends and Opportunities Thailand's Political Economy and the Development of Interest Groups 5 THE BANGKOK METROPOLITAN REGION (BMR): 154 WATER DEMAND PROFILE Geographical Information The BMR's Water Supply The BMR's Growth Pattern Water Demand by Sector Summarizing Water Demand Implications Projections of BMR's Future Water Demand The Current Water-Pricing System in Thailand 6 THE ISSUE OF PROPERTY RIGHTS IN RELATION TO 212 THALILAND'S WATER MANAGEMENT SYSTEM The Issue of Property Rights Efforts to Specify Property Rights to Water in Thailand Thailand's Historical Development of Resource Ownership Considering Property Rights to Water for Thailand's Water Allocation System v Chapter Page 7 WATER PRICING FOR THAILAND 233 Trends in Thailand with regard to Water Allocation Currently Proposed Solutions in Thailand Summing Up: Water-Pricing as an Alternative for Thailand's Water Allocation System Conclusions APPENDICES 274 BIBLIOGRAPHY 314 vi LIST OF ILLUSTRATIONS Figure Page 1.1 Total Global Water Resources 6 1.2 The Compositions in the Global Fresh Water of 3% 6 1.3 Stable & Available Fresh Water Runoff relative to Global Water Resource 7 and Fresh Water Volume 5.1 Monthly Distribution of Average Rainfall in the Central Region of Thailand 157 (1960-1989) 5.2 Water Allocation in the Central Plains 159 5.3 Map of the Bangkok Metropolitan Region (BMR) 164 5.4 Area under Agriculture as a Percentage to Total BMR Land Area 168 5.5 Comparisons of Estimated Industrial Water Use of Piped Water and 177 DMR's Records of Industrial Groundwater Use to the Estimated Actual Total Industrial Water Use 5.6 The Three Provinces with Manufacturing Establishments as the Larger Source 179 of BOD Discharge than Households 5.7 Residential Water Consumption through MWA's Service as a Percentage to 188 MWA's Total Water Sale (1984-1993) 5.8 MWA's Operations in 1993 188 5.9 Water Demand by Each Sector as a Percentage to BMR's Total 202 5.10 Real GDP Growth Rate in Each Sector of the BMR (1983-1990) 203 5.11 Conservative Estimates of Industrial Groundwater Demand and the Demand on 204 MWA's Service when 95% of the Amount is to be Supplied by MWA vii LIST OF ABBREVIATIONS BMR BMA TDRI MWA PWA RID DMR NEB NESDB EGAT NRC TCC ATI TBA JPPCC Bangkok Metropolitan Region Bangkok Metropolitan Area Thailand Development Research Institute Metropolitan Waterworks Authority Provincial Waterworks Authority Royal Irrigation Department Department of Mineral Resources National Environment Board National Economic and Social Development Board Electricity Generating Authority of Thailand National Research Council Thai Chamber of Commerce Association of Thai Industries Thai Banking Association Joint Public and Private Sector Consultative Committee OECD - Organization for Economic Co-operation and Development NGO - Non Governmental Organization GDP - Gross Domestic Product BOD - Biological Oxygen Demand NRW - Non Revenue Water MOC - Marginal Opportunity Cost CBA - Cost-Benefit Analysis CMY - Cubic Metres per Year CMS - Cubic Metres per Second MCMD - Million Cubic Metres per Day MCM - Million Cubic Metres viii ACKNOWLEDGEMENT The process of this study has provided me with great opportunities to work with several interesting people and to gain invaluable experiences. My supervisory committee, Dr. Les Lavkulich, Dr. George Eaton, Dr. Geoffrey Hainsworth, my thesis supervisor Dr. Michael Leaf, and my university examiners Dr. Terence Mcgee and Dr. Thomas Hutton have significantly contributed to the completion of my thesis. Dr. George Eaton has been very understanding and very generous with his time, kindly remaining as a member of my thesis supervisory committee throughout the course of change in the direction of my study. Dr. Michael Leaf has contributed greatly to the content of the thesis and has been very patient throughout the phase of research and writing. Dr. Hutton has, to the last minute, given advice on the final manuscript of the thesis. I would like to thank all those who have supported me and provided the materials necessary for my research. Khun Poonsin and Dr. Kamol Wongkoltoot have been most kind in making the interviews in Thailand possible and in providing the interview results. Khun Pirongrong Ramasoota has been very helpful in directing me to related literature and in connecting me to one of the most important key contacts, Khun Pana Janviroj. Khun Pana's provision of information and discussions with me during the final stages of my research has been very insightful and most helpful to my writing. Many thanks to all my friends in RMES and Nancy Dick who have made this program a wonderfully unique experience for me. Their support and encouragement has made this task an enjoyable one. To Gordon Paslawski, my best friend, who has always been there for me. Thank you to my dear mother and my family who never cease to confirm my determination to go home and make use of my education. The most special person whom I would like to thank once again is Dr. Les Lavkulich. My gratitude for all he has been can never be sufficiently expressed nor can his wonderful character be described by mere words. I am indebted to Dr. Les Lavkulich for giving me immense insights and inspirations throughout the process of my education, not only in academics but also in improving as a person. Over the years of my studies at UBC, he has taught me to appreciate what education truly means and provided me with the opportunity to develop and learn to believe in myself. His endless patience, encouragement, guidance, and aid because of his care for students have been immeasurable. I will always treasure this experience. ix CHAPTER 1: INTRODUCTION Throughout history, humankind has intervened to change the distribution of water on earth, a process which has accelerated greatly since the beginning of the Industrial Revolution. Through humankind alterations in land use patterns and their attempt to manage water, the flow and storage of water has been significantly effected. These human activities, which have disturbed the hydrologic cycle are well outlined by LVovich et al. (1990), "The principal direct actions were in manipulating stream channels, damming water courses, draining wetlands, transferring water to urban and industrial consumers, extracting groundwater, and of greatest human consequence, irrigating agricultural lands. Chief among the indirect actions were the spread of cities, the plowing of grasslands, and the felling of forests".1 The intensity of these activities has accelerated over time in response to the increase in the number of global population and the intensifying pattern of their water use. As a result, several negative effects have been felt because of the dwindling amount of water availability and also by the deteriorating quality of water sources. At this point, scientific evidence is essentially needed to identify the extent of the problems but the search for appropriate methods of management has been no less important. While this search has become one of the major policy issues in several countries today, it is also becoming more understood that the policy questions are largely those of social science which involve concepts of social organization. Social organization clearly involves patterns of social relationships and institutional arrangements and there is a range of possibilities of what is considered acceptable in the search for 1 LVovich et al., 1990, "Use and Transformation of Terrestrial Water Systems", 235. 1 new policies and institutional arrangements2 but "Because of human error, political pressures, and the lack of appropriate information about a water allocation issue, the right matrix of institutions might not always be supplied... These institutions, if they are supplied are likely to be shaped by existing cultural, social, and political aspects of a society".3 The process of institutional change where society undertakes adjustments to accommodate new and increased demands of its members is believed by many to be a political issue and thus the direction that certain policies take would depend on those with political power. 1.1 Objective of the Study; It is the objective of this study to examine the problem of water allocation under the rapidly changing social and economic conditions of Thailand; with the case study of the Bangkok Metropolitan Region (BMR) where the change is most evident. The focus of this study will be on the recently proposed solution to the water allocation problem in Thailand; the introduction of a comprehensive water-pricing system as a tool for demand management. While this study agrees with other studies on water management issues in Thailand in that at the preliminary stage the feasibility of water-pricing depends on the success of institutional reforms, the study will take a step back to point out that there are certain elements within the Thai political economic arena which cannot be overlooked because they are likely to be the force to make institutional reform possible, if at all. It is indisputable that institutional reform is a crucial issue, but it must not be ignored that the dynamic elements -2 Hainsworth, 1992,"Economic Perspectives on Population-Environment Relationships", 68. Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 3. 2 seen in this study as the interest groups - will be the important player in determining whether policies such as water-pricing will actually happen. Under the assumption that "The direction that changes in a particular society's values and institutions are likely to take (or are allowed to take) will be greatly affected by the specific ideology of those who wield power in that society"4, the study will consider the value and the role of interest groups within the Thai political economy to be the major indicator of whether pertinent changes for the introduction of water-pricing are viable. Because water-pricing techniques are a particular kind of tool which operate in a market setting, their application may require certain social relationships among interest groups to foster an effective and equitable system of water allocation. The study will illustrate that the historical development of these relations has in the Thai case been hampered by, first, the collapse of traditional Thai systems of collective social organization based on reciprocal relations and redistributive exchange. The centralization and growth of state control over local resource allocation decisions and the opening of the local economy which attached local production to the exchange market had undermined the institutions which were the basis for social integration in traditional Thai society. Secondly, while the state had taken over the status of the 'patron' in the new, centralized resource allocation structure, it has not been able to actually fulfill the tasks performed by patrons in the traditional system. This has caused the present discrepancies between the rights of the 'clients' to use water and their share of responsibility to help upkeep the efficiency and equity of the allocation system. 4 Hainsworth, 1992,"Economic Perspectives on Population-Environment Relationships", 68. 3 It will be proposed that the interest groups within the Thai political economy over time have taken on distinctive roles within the policy arena. In the area of water, this has implications for reform which go beyond simply devising a water-pricing system. These reforms are the tasks of "...strengthening and rearranging the social organizational patterns that exist (or that need to be established) enable the producers themselves to use, protect, and enhance their local resources".5 In the case of Thailand, the effort to strengthen and rearrange the social organization patterns must be based on the understanding that the interest groups are the essential elements of relations within Thai society and they are the source of political power. The complexity of water allocation issues also lie in the task of finding the appropriate form of social organization which is structurally suited to provide the management skills required. This becomes especially complicated when the resource in question is of a peculiar physical nature such as water. The following outlines some of these water issues from a global perspective. 1.2 Worldwide Problems with respect to Water: Many of the major issues concerning our well-being today are water related, fundamentally because of water's significant role in the biosphere. Water is an important and multifaceted resource to human activities because of its unique physical and chemical qualities demonstrated by its density, heat, and dissolving capacity.6 The fact that water is a fluid resource also enhances the complexities of water problems, especially when taking into account the 5 Cernea.1994, Environmental and Social Requirements for Resource-Based Regional Development", 197. 6 Falkenmaik, 1990, "Global Water Issues Confronting Humanity", 177. 4 variations in time, the self-regeneration capacity of different areas in the water system, and the chemical interactions among the different wastes discharged into the water course. Human use of water has been demanding in terms of both quantity and quality and as a result, the issue of water resource management involves two interrelated types of activities: water allocation and water quality control. Although the quantity of water measured in natural units is fixed in supply, water quality can be altered substantially through human action. 1.21 Available Water Supply on a Global Basis: By looking only at the total volume of global water resource, one would think that water is an abundant resource. However, the global water situation suggests otherwise. Although the total volume of global water resources is estimated to be as high as 1,384,120,000 km3 (or 1.38 billion km3), approximately 97 percent of this is seawater. Fresh-water makes up the remaining balance, of which 2 percent is in the form of icecaps and glaciers, and a large part of the remaining 1 percent is inaccessible groundwater7 (see appendix). Of the global fresh-water volume, only 44,130 km3 or 0.001% (0.00003% of total global water volume) is estimated to be the contemporary annual fresh-water runoff8 However, the estimated stable portion of the river flow is suggested as a better indicator of water resource availability is. The World Resources Institute estimates that of the total global runoff, 7 McDonald and Kay, 1988, "Water Resources: Issues and Strategies",13. 8 LVovich et al., 1990," Use and Transformation of Terrestrial Water Systems", p.237, suggest that the total 44,130 km3/yr of global fresh-water flow comprise of: 1) 38,830 km3/yr of river runoff, incuding anthropogenic transformations in 1965; 2) 2,900 km3/yr of water and ice runoff from polar glaciers; and 3) 2,400 km3/yr of direct underground runoff into oceans. 5 approximately 9,000 km3 or 0.2% (0.0002% of global fresh water volume or 0.00001% of total global water volume) can be considered as stable and available for supply purposes.9 Figure 1.1 The Total Global Water Resource of 1,384,120,000 Cubic Kilometers Seawater 1,348,000,000 (97.39%) Fresh water 36,020,000 (2.60%) Figure 1.2 The Compositions in the Global Fresh water of 3% Groundwater 8,062,000 (0.58%) Lakes & Rivers 225,000 (0.02%) Atmosphere 13,000 (0.001%) Ice caps & Glaciers 27,820,000 (2.01%) Source: Baumgartner and Reichel (1975) as cited in McDonald & Kay 1988. 9 McDonald and Kay, 1988, "Water Resources: Issues and Strategies", 56-58, suggests according to LVovich's definition that stable runoff is the base flow plus the stable surface runoff components of river flow. 6 1.22 The Uneven Distribution of Global Water Supply: Another important point to consider is that the total available amount of water is unevenly distributed due to climatic differences in each region coupled with human efforts to manage water resources. Categorizing countries into two broad groups, the water-rich and the water-poor countries, a study based on the per capita water availability by Forkasiewicz and Margat (1980) reflects the uneven global pattern of water supply. It is estimated that while the annual per capita water supply of Malta is 70 cubic meters, that of Canada is approximately 121,930 cubic meters.10 Logically, the continuous increase in world population also has obvious implications for reduced volume of per capita water availability. Figure 1.3: Stable & Available Fresh Water Runoff relative to Global Water Resource and Fresh Water Volume: Runoff Available for Supply 9,000 (.00001%) Global Fresh Water Runoff 44,130 Total Global Fresh Water 36 (2.60%) Total Global Water 1,384 0.00 200.00 400.00 600.00 800.00 1,000.00 1,200.00 1,400.00 Million Cubic Meters Source: Baumgartner and Reichel (1975), L'vovich et al. (1990), and World Resources Institute (WRI1986) as cited by McDonald and Kay,(1988). McDonald and Kay, 1988, "Water Resources: Issues and Strategies", 58. 7 1.3 Water Issues from a Global Perspective; Given society's dependence on water and the fact that though renewable, water is a finite resource, the major problem we are confronted with is that of the decreasing balance between available water supply and changing demand. This problem may be attributed to the fact that water needs continue to rise along with the increase in global population. At the same time, efforts to improve living conditions have been in such a manner that require more per capita water use. And to no less degree, the intensity of water use and waste generated from these activities increasingly strain the quality of the existing water sources. Three components: 1) population increase; 2) per capita use increase; and 3) intensity in the manner water is used, all contribute to water stress. Other challenges continue to pose constraints for water planners for example on the supply side, untapped sources are becoming more difficult as well as increasingly expensive to access. In the last two decades, intensified environmental concerns over increased water use have made traditional development of new water supply sources politically infeasible.11 Surface water in many areas has become unreliable due to quality degradation through wastes. Groundwater sources have been depleted and contaminated to a point where supplies are further limited. Occurrence of droughts in various areas has proven dependence on rainfall to be highly risky thus increasing the competition for water between the urban and agricultural sector. The major issues related to these challenges could be summarized as follows: 11 Dziegielewski and Baumann, 1992, "The Benefits of Managing Urban Water Demands", 7. 8 1.31 The Issues; 1. Because water is a finite resource, the continuous increase in global population results in ike consequential decrease in per capita supply of water. For biological survival, humans' household needs for water can be adequately met by less than 100 litres per person per day; equivalent to an annual per capita use of approximately 35 cubic metres.12 As a result of the fact that water is a finite resource, global population increase of 1.8 billion since 1970 has caused per capita water supplies to decrease by a third and this trend is projected to continue into the next decade.13 While water availability remains at a fixed amount, human populations in most countries are steadily increasing.14 The issue, however, extends beyond biological survival; the improvement in today's living standards has caused water demand to grow at a faster pace than population. Water use in the year 1980 was estimated at 44% of the 9,000 km3 stable runoff or 3,960 cubic kilometers.15 Average annual per capita water use today is approximately 800 cubic metres, almost 50 percent higher than that in 1950, and this trend is also projected to continue.16 Although overall cities account for less than one tenth of the world's total water use, the geographic concentration as well as the escalation of their demand strains the capacity of local water sources.17 Under the circumstances that the current practices of water usage are allowed to continue at the ongoing rate without significant counter measures, it is likely that water shortages will become commonplace within the next century. 12 Clarke, 1990, "Water: The International Crisis", 19. 13 Postel, "Last Oasis", 1992, 28. 14 Clarke, 1990, "Water: The International Crisis", 69. 15 McDonald and Kay, 1988, "Water Resources: Issues and Strategies", 59. 16 Postel, 1992, "Last Oasis", 39. 17 Ibid., 147. 9 2. Although water is not evenly distributed or accessible for population in certain areas, scarcity has been masked by water supply management such as damming and diverting water resources; this has created an illusion that water is abundantly available in some water scarce areas and thus unsustainable consumption of water resource becomes apparent Water development projects generally allow people more access to as well as control over water supply. Because of these water development projects which facilitate access to water sources, water demands have been allowed to continuously increase at a steady pace. Water scarcity is being masked as more projects are built to accommodate accelerating water demands. Having tripled since 1950, global annual water use is now estimated to be as high as 4,340 cubic kilometers; accounting for 30 percent of the world's stable renewable supply.18 At the current rate of water usage, several countries will likely experience chronic problems of both water shortage during dry seasons and rapidly deteriorating water quality. The emergence of extensive water utility systems in correspondence to increasing urbanization has created the misperception that water supplies are simply accessible and inexpensive. For this reason, the conventional supply management approach is being strongly criticized for masking the true water-scarce situation. As cities continue to expand and local water bodies are fully exploited, ever distant sources are being tapped for new supply. Environmental concerns in the last two decades have made the development of new water supply sources and prospects for financing major construction programs a discouraging task as it is no longer politically feasible.19 At this point, where it is unclear as to how long and from where additional water can continue to be obtained, water planners are turning to demand management as a promising alternative. Postel, 1992, "Last Oasis", 39. Dziegielewski and Baumann, 1992, "The Benefits of Managing Water Demand", 7. 10 3. The escalation in water demand has significant implications for changes in the quality of water resources as more waste is generated, This contamination further causes the quantities of present usable water supply sources to diminish at a rapid rate. LVovich et al. note that "...the perturbations in the water cycle often produce detrimental effects on quality rather than quantity...Human activities have directly and indirectly altered the qualities of fresh water resources, and in some areas reduced their quantities".20 Their observation also suggests that the substantial increase in fresh water withdrawal for domestic and industrial purposes, starting in the nineteenth century, has been accompanied by the generation of wastewater. This diverse and complex pattern of water use has been supported by the improved methods of water withdrawals and inexpensive energy sources. However, while per capita water intake has been increasing, methods for treating or preventing wastewater have not been developed at a proportionate rate.21 A liter of wastewater discharged contaminates many additional liters of the receiving water body. This is especially evident in countries where lack of wastewater treatment control during industrialization poses tremendous threats on water bodies. In developing countries, the cost of wastewater disposal is estimated to be five to six times as much as the cost of supplying the water.22 By estimation, annual wastewater discharged into rivers and streams worldwide average 450 cubic kilometers; to dilute and transport this amount of contaminated water to a point where it can be used again requires a further 6,000 cubic kilometers of water; approximately two-thirds of total reliable runoffs.23 LVovich et al., 1990, "Use and Transformation of Terrestrial Water Systems",253. 21 Ibid., 243. 22 Rogers, 1992, as cited by Levy et al., 1993, "Improving the Efficiency of the Bangkok Water System through Demand Side Management and Repricing", 47. 23 Clarke, 1990, "Water: The International Crisis", 24. 11 Pollutants are mostly disposed into water bodies from the sources of three sectors: urban development areas (towns, housing estates, villages); industrial areas; and agricultural areas.24 The water demand of all three sources is inextricably linked to the quality of the water systems; both surface water and groundwater.25 If demand on surface water systems can be reduced, either for consumption or for disposal purposes, it would mean less wastewater to be discharged into water bodies and thus reduction in the strain currently placed on water quality. Just as well, reduced demand on groundwater can help prevent the infiltration of saltwater, septic leachate, and other pollutants which contaminate the aquifer. 4. Because the available amount of water supply is subject to multiple-use management, one of the most significant challenges is to determine an alternative for its allocative efficiency. However, the indicators of allocative efficiency are controversial. McDonald & Kay suggest that because water is required in various uses, at different levels, it produces ", spatial, and organizational problems".26 The complexity involved in the management of water resources is subject to " based on compromise and conflict resolution".27 The problem of water resource allocation among sectors within an economy poses an example of this point. At present, agriculture is the sector claiming the largest share of global water supply while its use is the least efficient. The average irrigation efficiency estimated at 40 percent worldwide, implies that the majority of water diverted for irrigation purposes never actually benefits the designated crops.28 In such cases of inefficient use of water Blaszyk, 1991, "Specific Sources of Water Pollution", 43. Vickers, 1991, "The Emerging Demand-Side Era in Water Management", 39. McDonald and Kay, 1988, "Water Resources: Issues and Strategies", 1. Ibid., 1. Postel, 1992, "Last Oasis", 99. 12 for irrigation, externalities such as increased contamination of aquifers from nitrate, phosphate, and pesticide and increased soil degradation through compaction and salinisation can occur.29 Today's agricultural activities are characterized by the intensification of land use which usually involves the overuse of fertilizers and pesticides. The impact of these externalities from agricultural activities on the water resource can be widespread and severe. It is also expected that this trend will increase given that there is a continued need for growth in food production.30 Under the present water supply situation, there are concerns about how this will affect our ability to grow food in future years. For much of its history until now, the agricultural sector's water use has been heavily subsidized, especially in developing countries where agriculture accommodates the livelihood of a large number of the population. Subsidized water use for irrigation has been criticized to be one of the major causes of inefficient water resource allocation. Further criticism is that it fails to encourage the development of more efficient irrigation techniques and the selection of water-efficient crops in the agricultural sector.31 This, in turn, has lead to the argument that a larger share of water resources should be reallocated to the urban and industrial sectors where value-added is higher. As urbanization accelerates, the competition for water between the agricultural sector and the urban and industrial sectors becomes more evident. Of total global water resources, agriculture requires the largest share; approximately six times the requirement for industrial and domestic uses.32 Industries collectively account for 29 Herrington, 1987, "Pricing of Water Services", 13. 30 Pretty, 1991, "Planning and Management for Water and Land Resources: Partnership for Sustainable Development", 49. 31 Levy et al.,1993, "Improving the Efficiency of the Bangkok Water System through Demand Side Management and Repricing", 46. 32 Clarke, 1990, "Water: The Internations Crisis", 27. 13 nearly a quarter of the world's water use; at least twice the amount of domestic use. This share, however, represents an important segment of demand; partly because industrial processes pollute a disproportionate amount of water.34 The same type of problem applies to domestic water demand; although household and even municipal water needs account for a small proportion of the water supply the damage as witnessed in many developing countries has been acute. River pollution from raw sewage has reached levels that are many thousand times higher than recommended safe limits for both drinking and bathing.35 As a result, it is controversial as to what indicator or balance of indicators (equity, economic efficiency, or environmental sustainability) should be used to determine the most beneficial allocation of the water resource. 5. Although a crucial part of the global system, water problems generally require management efforts within local and regional levels. The idea of management efforts within local and regional levels is becoming more widely supported. Conventional resource management thinking, following Hardin's (1968) model of "tragedy of the commons", has been criticized for overemphasizing the solutions of privatization and central administrative controls at the expense of local-level controls and self-management.36 Interest in traditional resource management systems have been renewed, partially due to the failures witnessed by contemporary development projects. Once again, responsibility to the community ingrained in common management systems, not necessarily traditional, is emphasized as opposed to the priority given to individualism. 33 Postel, 1992, "Last Oasis", 136. 34 Rogers, 1986, "Water Not as Cheap as You Think", 39. 35 Clarke, 1990, "Water: The International Crisis", 24. 36 Berkes et al.,1989, "Common Property Resources: Ecology and Community-Based Sustainable Development", 2. 14 Clarke observes that the general problems encountered in water resource management is that there is little accountability by those in control, and little control by those who are supposed to benefit.37 However, it is also the case that the same time at which water management must be affected at the local level by local people for it to work, perhaps more than any other resource, water must be subject to overall centralized control and planning. Questions concerning how the two systems can be integrated have been addressed in the studies of common property resources. In attempting to determine the appropriate resource management systems, these few examples of questions are addressed: Should management come from the "top down" or the " bottom up"?; Should they be based on those techniques of the industrialized countries or should they be developed by rehabilitating, adapting and or upgrading the traditional local level resource management systems and institutions?38 The recognition of the importance of traditional resource management systems has become a crucial approach in water resource management studies, and one that has come to receive increasing credibility. 6. Direct regulations characterizing the contemporary approach to water resources management by most water institutions prove to be ineffective. The market-based approach is believed to provide a more promising alternative. Conventional water resource management instruments are commonly direct regulations such as the enforcement of ambient and effluent standards. Experience with this type of approach has allowed economists to criticize that direct regulations fail to achieve environmental objectives in the least costly manner, the reason given is that direct regulation 37 Clarke, 1990, "Water: The International Crisis", 173. 38 Berkes et al.,1989,"Common Property Resources: Ecology and Community-Based Sustainable Development", 3. 15 relies heavily upon centralized standard setting and enforcement and thus is vulnerable to inefficiency, enforcement difficulties, and unpenalized delay.39 As an alternative to direct regulation, economists have proposed market-based approaches or incentive-based mechanisms whereby consumers are provided with an incentive to equate abatement costs at the margin, thus achieving a given level of environmental quality at least cost.40 Li theory, incentive-based instruments typically provide more cost-effective alternatives because they encourage users to take actions consistent with economic and environmental values of (water) resources.41 Examples of incentive-based instruments are those measures which facilitate voluntary water transfers. In such cases the government would need to remove barriers to water markets by validating that voluntary transfers of water are permissible and by establishing rules to protect public and other third-party uses of water. This is believed to promote more efficient allocation of water resources and thus curb the need for development of new water supplies. Underlying this idea is the economic reasoning which suggest that allocative efficiency of water resources can be achieved through the economic instrument of appropriate pricing. Such approaches view contemporary water problems as arising from the undervaluation of the resource. The major argument that proponents of the incentive-based approach stress is the fact that water is undervalued through lack of appropriate pricing. Just as other resources, water would often be overused when the costs of its use is not taken into account in production. This appears to be a common phenomenon as the water resource is widely subsidized. To be 39 Anderson et al., 1977, "Environmental Improvement through Economic Incentives", 9. 40 Hahn and Stavins,1991,"Economic Incentives for Environmental Protection:Integrating Theory and Practice", 3. 41 Stavins, 1990, "Innovative Policies for Sustainable Development in the 1990s: Economic Incentives for Environmental Protection", 22. 16 utilized efficiently, either for consumption or waste disposal usage, water must be considered as an input to production. In cases where water source development is required to provide additional supply, it has been recommended that water should be priced according to the cost of producing it at the newest dam or other supply source. This is believed to indicate how much consumers truly want additional supplies in the future. Pricing can thus serve as a discouragement for overuse or in other words, encourage more efficient use of water. An example is industrial water use. If the charges on industrial water use and wastewater discharge were to be raised, industries would adjust to adopt more innovative technologies such as dry cooling towers, use of low-quality saline or reclaimed sewage water for cooling purposes rather than drinking-quality water.42 Water-pricing is an incentive-based policy instrument that has been widely studied and accepted under the economic approach as a powerful tool in reflecting the true value of water in the course of water usage. However, the application of water-pricing as a policy instrument appears to be constrained by several factors; generally referred to as political constraints. 1.4 Implications from Water Issues Worldwide: The first four issues outlined above reflect an urgent need to increase water use efficiency. This has in part brought about the debate on the latter two issues, those of management. Criticisms of contemporary resource development ascribe the problems to the " Rogers, 1989, "Water Not as Cheap as You Think", 40. 17 failure to match water engineering to suitable social and managerial expertise".43 Most water resources planning in the past has been characterized by that of supply management which mainly involves efforts to develop new water supplies. In recent years, however, a number of unconventional solutions to water supply problems have been included in water resources planning.44 As an alternative to developing new water supplies, water planners have turned to water-demand management and consequently various policy measures have also been designed and proposed by advocates of this concept. Most of these measures are, however, notably based on neoclassical analysis and recognized under the umbrella of economic instruments or market-based instruments. But despite the wide application of so-called market-based policy measures, more often than not, water resource issues appear to be dealt with by means of political decisions rather than economic decisions. Therefore, while water resource issues lend themselves to be generalized globally in several aspects, the solution to such issues are much less generalizable. Each society represents, to a certain degree, a unique set of answers to their own problems, especially as allocation of resources is a political issue. The choice of solutions to be applied needs to be studied according to locality and social organization. In other words, while water resource problems occur globally, the choice of solutions to such problems are not global. By the same token, water resource problems in Thailand parallel those of global water resource issues considered above, but at the same time, the decisions and measures taken to resolve these problems are determined and guided by forces that are, to some extent, different from those of McDonald and Kay, 1988, "Water Resources: Issues and Strategies", 2. 44 Dziegielewski and Baumann, 1992, "The Benefits of Managing Urban Water Demands", 39. 18 other societies. These forces include the existing legal and institutional structures which are founded on Thai social, cultural, and political evolution. 1.5 The Study This study consists of seven chapters. Chapter two starts with a review of the literature related to the issues concerning water allocation in Thailand. The review indicates that most studies attribute the problems to be one of market failure and in the case of Thailand, the government's attempt to correct market failure has lead to further failures on the part of the government. The solution proposed by these studies is to encourage demand management; bringing water resources into the market system by way of introducing a comprehensive water-pricing scheme, and thus allow water allocation decisions to be determined by the market rather than the government. But because water resources in Thailand are presently governed under a system of open access, it is believed that the introduction of a pricing system would not be feasible unless specifications of property rights to water are enforced. The chapter then proceeds to lay out the theoretical framework to be used in the analysis in the following chapters. These include the theories of demand management, water-pricing, and property rights. The third chapter is an overview of the water issues in Thailand and most specifically the Bangkok Metropolitan Region (BMR) where the recent experience of water crisis has been most acute because of the concentration in the economic and population growth in the area, in contrast to the rest of the country, causing water allocation conflicts 19 among the various sectors. The issues are grouped into three categories of problems: water shortage, water quality, and groundwater depletion. Chapter four then reviews institutional aspects of the Thai water management system, the organizational structure of which is believed to be facing increasing stress as the tasks have become ever more demanding than that which the existing structure can cope. Within this chapter the Thai water-related laws are also reviewed. But in order to address the argument that even without any formal institutional reform the present organizational structure is undergoing a process of change implicit in the Thai political economic development and such change will inevitably affect the trend in policy decisions concerning water management, this chapter includes a section on the formation of interest groups within the context of the Thai political economic development. Chapter five briefly looks at the water allocation system and focuses on providing a water demand profile of the BMR by distinguishing the types and volume of water required by each sector. The sectors are categorized into three: agricultural, industrial, and residential. With the assumption that the interest groups' water demand will be affected by the outcome of related policies and vice versa, the chapter summarizes the water demand implications projected to occur in each sector as a result of anticipated changes in economic development and government policies. Under the context of Thai political economic development discussed at length in chapter four, chapter six discusses the issue of property rights to water in terms of the development of interest groups and changes in the social relations within Thai society over time. 20 Synthesizing from previous chapters, chapter seven concludes that four major trends in Thailand have profound implications for interest groups' increased involvement in determining Thailand's future water allocation decisions. The trends include increased interest groups' influence on policy decision-making, the wave of privatization, the effort of the government in its policy to decentralize its authority over resource management, and the monarch's role in water resource management. 21 CHAPTER 2: RELEVANT THEORIES 2.1 Literature Review Policies concerning resource and environmental management which apply to the subject of water allocation and water quality control have long been a topic of debate within the economic arena under the concept of market failure. Market failure under contemporary discussions usually refers to four distinct phenomena which are mutually reinforcing in their effects when occurring together: externality, public goods, common property resources, and monopoly.1 2.11 Recent Literature on Thai Water Resource Problems The most comprehensive study of Thailand's current water allocation system by Christensen2 (1994), also addresses the problems of Thai water management as resulting from market failure. A study by Kaosa-ard3(1993) falls in the same line but is a much briefer analysis. While Kaosa-ard looks at the problems concerning the shortage of surface water and water quality, Christensen's study covers the complete cycle of the problems by also including the situation of groundwater depletion. Both authors attribute the root of the problem to be the lack of well defined property rights to water. This has resulted in a condition refered to as a missing market 'Randall, 1993, "The Problem of Market Failure", 145. 2 Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand''. Christensen and Boon-long, 1993, "Institutional Problems in Water Allocation: Challenges for New Legislation".Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for New Legislation". 3 Kaosa-ard and Kositrat, 1993, "Economic Instruments for Water Resource Management in Thailand". 22 whereby two forms of market failure occur: 1) the absence of a pricing mechanism; and 2) the production of negative externalities. The market is seen to fail because " does not create an appropriate constellation of incentives for an efficient allocation of water"4. Under such conditions, a third party intervention is required to correct market failures, usually the state, the local authorities, or community institutions. However, in the case of Thailand, both Kaosa-ard and Christensen agree that in the attempt to correct the market failures, the state has caused negative impacts, which both authors refer to as government failure. Government failures, all of which appear in the case in Thailand are believed to be 1) interventions which disrupt an already well-functioning market; 2) the lack of capacities pertinent to enforce or administer property rights if they were to be established, thus failing to factor in the true cost of water; and 3) the negligence of market failures altogether, possibly through political bias. Overall, both studies by Kaosa-ard and Christensen advocate market oriented solutions drawn from conventional approaches of the Pigouvian5 model (1920) and to a certain extent the ideas of property rights specification associated with Coase's6 theorem (1960). Basically, Kaosa-ard's argument is limited in pointing out that the Thai government's attempt to deal with market failure in water resource management has caused the problem to worsen because the government perceives water allocation to be an Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 3. 5Pigou, 1932, as cited by Coase, 1960, "The Problem of Social Cost", 158. 6Coase, 1960, "The Problem of Social Cost", 142-171. 23 administrative problem and therefore, has failed to consider the alternative of employing economic policy instruments. Fundamentally Kaosa-ard's study advocates the application of economic instruments for water management in Thailand and sets out to define the major obstacles in Thailand's present system which are seen to be: 1) the prevailing perception that water resource management is a technical and administrative problem; 2) the state's reluctance to use prices as an allocation mechanism because of political reasons7; 3) the pre-requisite for a tremendous number of qualified technical personnel and a critical mass of technical knowledge. To Kaosa-ard, full cost resource pricing, which will result in the reduction of water demand, stands to be the most desirable alternative because it is the most cost effective way for overcoming the problems of inefficiency in water use and water quality control. While Christensen's views fundamentally parallel those of Kaosa-ard's, his study takes a further step to suggest that institutional reform is crucial for a water pricing system to be successfully introduced. By the term institutions, Christensen means laws, enforcement mechanisms, and a system of property rights. While Christensen's study focuses on the understanding of the existing institutions it reveals that the Thai state's role is flawed by policy failures which are the consequence of both institutional and political fallibility.8 In Kaosa-ard and Kositrat, 1993, "Economic Intruments for Water Resource Management in Thailand", note that most difficult is the political problem of charging farmers water fees because farmers belong to the poorer segments of the economy and yet together bold the largest political votes. The political reasons for the reluctance to use prices in the allocation of water are further heightened under an elected government which relies on rural votes. Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 5, defines policy failures as "... problems of governance arising from institutional and political fallibilities". In turn, institutional failures are "...the result from faulty management and organization, poor communication and imperfect information on the 24 Christensen's view, the effectiveness of introducing pricing is limited by the inconsistencies in the public bureaucracy. Therefore, institutional reform9 is vital if demand-side inefficiencies are to be addressed and pricing to be introduced as an allocation mechanism. Only by such reform will the specification and enforcement of property rights as well as the provision of a conducive administrative framework be made possible. By addressing the issue of property rights to water, Christensen has introduced a new dimension most valuable to the analysis of water allocation problems in Thailand. A further step which Christensen has taken is to recommend that the method to most effectively apply economic policy instruments is to phase in pricing and penalties by sub-sector or to initiate with differential pricing for different clientele. The industrial sector is proposed as the sector most likely to be financially and administratively prepared to bear a higher cost. On the other hand, farmers are believed to pose the greatest political obstacle to the introduction of water pricing as Christensen projects that "...they are likely to appeal to their parliamentarians to defeat any pending legislation".10 In terms of extra-bureaucratic influence, the study by Christensen sees farmers and businesses as the most influential interest groups in Thailand. In such cases, elected governments are under pressure to ignore market part of the state", and political failures are "problems occuring when the lines of accountability is ill-defined, or when a clear distinction between public and private interest is lacking". Christensen and Boon-long, 1994, 36. Christensen believes that "By tying economic rewards to the improved performance of government agency services, economic instrument can be a powerful tool in getting the government to focus on demand-side inefficiencies...But the introduction of economic policy instruments must be paired with not modest institutional development among the key water-related agencies". In refering to the two draft codes, Christensen suggests that "...bureaucratic reform measures to relieve the institutional bottlenecks and improve organizational capacities and information bases of the overseeing agencies would have to be implemented". Unpublished document by Christensen, 1994. 25 failures. The reason is that they rely on rural votes from the farmers and depend on political campaign funding from large businesses. Although Christensen acknowledges the extra-bureaucratic influence as comingfrom two interest groups: farmers and businesses, these two interest groups are depicted in more of a negative light, as illustrated by the explanation that "Political and institutional fallibilities are related...A highly fallible institutional framework can discourage officials from acting in the public interest and thereby increase the likelihood that political distortions will pervade decision-making".11 While Christensen sees water allocation for different categories of use to be a political decision, his study primarily intends to specify the feature of the water allocation system's institutional framework and identifies its key management bottlenecks to be an ineffective institutional framework for the enforcement of property rights to water. In other words, central to the study is the existing system whereby the government dominates policy decision-making and the bureaucrats are the prime players in activating the government's policy. The interest groups' role are seen merely as the pressure that pervades government's decision-making and distorts the bureaucrats' action in such a way that does not allow the government to act in the public's interest. In this case, farmers through their votes and the businesses through their financial support in political campaigns prevent the government's role in correcting market failure by way of water pricing. The reason that the interest groups' potentially positive influence has not been considered could be because Christensen's main objective is to ultimately use the analysis for 11 Unpublished document by Christensen, 1994. 26 the purpose of judging the potential impacts and consequences of the two drafts of Water Codes most recently proposed12 to introduce water pricing in Thailand. Therefore, the analysis is confined to the issues raised by those draft codes.13 Nevertheless, Christensen's work is a remarkably comprehensive study of water allocation problems pertaining to the Thai government failures, particularly in terms of identifying its inhospitable institutional framework which promotes political fallibility. The gist of Christensen's argument is that demand management through economic policy instruments, particularly pricing, is the alternative Thailand must take to overcome its water allocation problems. However, because under the prevailing institutional framework where water agencies are factious, they become susceptible to interest group pressures, an inability which Christensen refers to as the lack of political will. To achieve effective results, Thailand, therefore, needs to clearly specify the property rights to water and significantly reform its institutions to provide a conducive administrative framework for the effective application of such policies. However, Christensen has not advanced or proposed any institutional options. But the broad parameters that Christensen highlighted as crucial in terms of institutional reform are in line with those elaborated in the World Development Report14 (1994). The report 12 Christensen and Boon-long, 1944, 23. Two draft Water Codes are being considered. One draft was produced by the National Research Council (NRC) in 1992. Shortly after that, an alternative draft was produced by the Law Faculty of Thammasat University commissioned by the Department of Pollution Control (DPT). Whether one of the draft will be submitted to the Parliament or both be merged into one legislation, Christensen points out that either way, the drafts still "...reflect the conventional wisdom among officials and other water experts in Thailand about how to improve the country's water management". Ibid., 27. Christensen's argument is that what Thailand needs presently is to tie new market incentives to the improved government water services in the irrigation, water distribution, and water treatment systems. But neither draft provides this connection. 14 World Bank, 1994, "Infrastructure for Development". 27 prescribed a menu of institutional options: public ownership and operation; public ownership but with private responsibility for all operation; private ownership and operation; and community and user provision. The choices among the options are believed to vary among countries depending on their economic, institutional, and social characteristics.15 In fact, the study concluded from the country study cases that "Reliance on the price mechanism is in the interest of users because it directs provision toward preferences determined by users rather than bureaucrats".16 This together with the perspective that the present Thai political environment has developed to one of a liberal corporatist state as observed by Laothamatas17 allows for a different aspect of analysis in the area of Thai water management. 2.12 Literature on Changes within Thailand's Political Economy: Implications for the Formation of Interest Groups Laothamatas's analysis of the Thai political economy describes the present condition as a liberal corporatist model, one which " marked by a high degree of autonomy and spontaneity, and by the central role of the private groups in the creation and operation of their representative associations, as well as systems of government-group interest mediation".18 In other words, it is suggested that the Thai political economy can no longer be depicted as a bureaucratic polity because politically effective extra-bureaucratic groups have evidently been formed by organized business and these groups now play an 15 World Bank, 1994, "Infrastructure for Development", 52-72. 16Ibid., 49. 17 Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism". 18 Ibid., 13. 28 important part in government policy determination which was once solely the authority of the bureaucratic elite. According to Laothamatas's observation there has been evidence of political collective work by the business associations which means that there have been efforts of initiations and formations of government policies and legislative measures which are deemed to be "...favorable to economic development in general or to the progress of particular economic sectors".19 When compared to other interest groups in the Thai political economic arena, the business associations appear to be the most organized and influential group. Policies of water allocation such as water-pricing which have direct effects on the operations of the industrial sector would be of concern to a significant part of these groups. And it is likely that organized business would be the group most capable of directing the course of policies concerning water allocation. 2.13 Literature on the Logic of Collective Actions Olson's work on the logic of collective action explains this phenomenon of the high degree of organization of business interests and their power as owing in large part to the fact that "...the business community is divided into a series of (generally oligopolistic) industries, each of which contains only a fairly small number of firms".20 In other words, the size of the organized business interest groups is small enough to allow for an effective lobby and therefore provides the groups with the political power which Olson believes "...naturally 19 Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic rood 29 Polity to Liberal Corporatism", 14. 20 Olson, 1965,"The Logic of Collective Action: Public Goods and the Theory of Groups", 143. and necessarily flows to those that control the business and the property of the country".21 In this respect, the business interests are organized as a general rule whereas other groups in the country such as consumers, farmers, labourers are organized only under special circumstances. Therefore, groups other than business interest groups are considered latent groups that are capable of organizing and acting effectively only if their power is crystallized by certain organizations where as a by-product, political power is provided. 2.2 Theoretical Framework for the Study This study draws on the various theories within the framework of the general literature on demand management with the focus on water pricing, and to a certain extent on the attempt to resolve the externality problem which leads to further discussions of the issue of property rights. The theory of collective action is also drawn upon for further analysis of the interest groups' role towards water pricing within Thailand's water allocation system. The initial area of interest for this study is the demand-management approach through a market-oriented solution, the introduction of a comprehensive water-pricing system alternatively advocated by a number of economists, lawyers, researchers, and some government officials22 to overcome the phenomena of market failure and the nature of the high level of political and social conflict involved in water allocation decisions in Thailand. Therefore, a review of the demand management concept and the underlying requirements in devising a water-pricing system is important initially to understand what this approach has to offer. 2101son,l%5,"The Logic of Collective Action: Public Goods and the Theory of Groups", 143 22Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 2. 30 The study further draws from literature which propose solutions to the problem of externalities. This leads to the study's focus on the issue of property rights which had been introduced in 1960 by Coase, but has only recently been seen as an important aspect of the water resource allocation problem in Thailand. An understanding of the alternatives under which property rights to water may be devised would allow for a more meaningful discussion about the feasibility of specifying property rights to water resources under Thailand's legal setting and no less important, to realize what is needed in this respect for a water pricing system to be feasible. Finally, the theory of collective action provides a logical step to the focus of this study: the analysis of Thailand's current condition in terms of political pressure on the decisions pertaining to the introduction of a sophisticated water pricing system, particularly the interest groups' role in determining the outcome of such decisions. This chapter thus examines each of the theories in light of its relevance to the present water management issues in Thailand. 2.3 Water Demand-Management In general, water management practices can be divided into two categories: those that augment supply and those that reduce demand (usually referred to as conservation).23 Frederick simply points out that" Supply-side management involves activities and policies that increase the supply of freshwater available to the region... demand management involves both allocating scarce supplies among sectors... and determining the conditions under which individual users Dziegielewski and Baumann, 1992, "The Benefits of Managing Urban Water Demands", 7. 31 within a sector use water".24 Li other words, water supply management focuses on ways of increasing the available supply of water while demand management focuses on working with what is taken as a limited supply. In the past, water demand management was limited only to drought emergency programs, such as water-use restrictions and rationing. However, in recent years, demand management has extended beyond that of emergency response; it has become an increasingly essential alternative in water management which involves long term measures for resource reallocation among sectors and for modifying consumers' water consumptive patterns to encourage water use efficiency. Such measures are seen to indirectly constitute a source of additional water supply. 2.31 Objectives of Demand Management While experts believe that under the current trend of water supply and demand imbalances, communities worldwide will inevitably face a widespread water crisis, several municipalities have shown successful examples in preventing this outcome through demand management. Through water management strategies, which pursue demand-side alternatives as opposed to previous supply-side emphasis, many municipalities in the United States have been able to constitute their source of additional water supply. It is estimated in southern California that by 2010, water conserved through increased efficiency of water use will constitute the largest single source of additional water.25 Frederick, 1992, Balancing Water Demands with Supplies: The Role of Management in a World of Increasing Scarcity", 40. 25 Dziegielewslri and Baumann, 1992,"The Benefits of Managing Urban Water Demands", 7. 32 Theoretically, measures for water demand-management are undertaken with the ultimate objective that water use patterns will be permanently modified to provide a source of additional water supply for future or alternate use. Such policy measures generally involve the encouragement of practices which reduce the use and loss of water and where recycling of water is increased to make available a subsequent water source. 2.32 Measures used for Demand-Management Demand-management measures are generally exercised through the combined measures of education, regulation, and market-based systems. The emphasis given to each type of measure, however, differs in each society. Education: Education was once only resorted to as a periodical response to drought, in the forms of public education and campaigns to encourage voluntary reduction in the consumption of water. Today, however, education has extended beyond temporary responses. It has become an important foundation for demand-management whereby it is considered a demand-management policy in its own right or as a necessary compliment to regulatory or market-based policies.26 Characterized by the provision of information and moral suasion, education's goal is to increase consumers' knowledge of the regulations and measures concerning water conservation whereby consumers are informed and encouraged to undertake alternatives that would result in water use efficiency. Examples of education practice include publicizing the listing of available water use Herrington, 1987, "Pricing of Water Services", 21. 33 appliances which conform to the plumbing code. Also quite common is to provide consumers with information on potential water-economizing alternatives and point out the magnitude of financial savings upon pursuing those alternatives. The key issue in education is not only to inform consumers of available technologies, but also to provide consumers with information concerning the feasible venues by which they may choose to operate those technologies to their benefits. Education has therefore come to involve long-term measures aimed at permanently modifying water-use patterns to replace what may be temporary reponses to droughts or other water-shortage crisis. It appears that southern California represents one of the most successful cases of water demand management through their educational methods known as the Urban Best Management Practices (BMPs). This program involves measures such as conservation planning, landscape irrigation, and appropriate industrial and commercial measures. Educational demand management measures in areas other than urban sectors have been noted to involve agricultural conservation tools which include techniques such as laser leveling, canal relining, drip irrigation, and agricultural extension programs. Direct Regulations: On the other hand, government regulations are the most common form of demand management measures. This is where government sets standards designed to regulate water consumption and use through authorities at the national, regional or local level. Theoretically, the standards are designed to achieve an optimal level of water demand reduction or in some cases to maintain certain environmental qualities. Such standards may be 34 determined based on technical limits or costs (service provision or pollution clean up) involved in such measures. Li order to assure that the standards are met, government polices the use of water resources by the coercive power of the state. In this respect, direct regulation relies heavily upon centralized standard setting and enforcement. This is usually expressed through regulations concerning a) the quantity of water used in the operation of water using equipment and b) the emission standards which stipulate the concentration level and volume of liquid wastes discharged.27 An example of direct regulation is the enforcement of the plumbing code which regulates water-conserving plumbing standards. The plumbing code generally involves the regulation of hardware tools for residential and municipality practices through residential plumbing-fixture retrofit programs. Such programs have proved to encourage and achieve substantial water savings. Another example of direct regulation is that of pollution control legislation whereby the level of wastewater discharge reduction to be achieved by the waste discharger is determined by the pollution control agency. The waste discharger is then expected to install the required abatement equipment to meet the standards by a certain date. Those who fail to meet the standards on time must justify their act and obtain variances from the agency, otherwise they are taken to court to face a fine for their violations.28 Regulation and legislation have been relatively dominant in establishing water conservation requirements for government agencies. In cases where conservation initiatives are not voluntarily taken by water users, enforcement efforts become necessary.29 So despite its 27 Herrington, 1987, "Pricing of Water Services"^. Anderson et al., 1977, "Environmental Improvement through Economic Incentives", 185. 29 Vickers, 1991, "The Emerging Demand-Side Era in Water Management'', 43. 35 positive outcomes in water savings, direct regulation has been criticized to provoke negative reactions from individuals as they are coerced to comply with certain rules rather than being encouraged through incentives. Therefore, contemporary demand management no longer looks upon direct regulation as the major policy instrument in water resource management but rather more as a complementary tool to other alternatives, especially market-based mechanisms. Market-Based Mechanisms: The device of providing incentives to guide resource consumptive patterns has long been proposed since Pigou's (1920) attempt to resolve the problem of externalities.30 The policy implications which the Pigouvian model carries are such that environmental damage has a cost and as such it should be reflected in a price which would be incorporated into economic decisions of producers of externalities.31 Pigou thus proposed a system whereby taxes and subsidies are devised centrally by the government to provide incentives in guiding firms producing externalities to the level of output which is deemed as socially optimal. In other words, the government assumes the authority to calculate optimum taxes and subsidies while the individual producers are free to rationally make decisions concerning their output. In this respect, the Pigouvian approach, when compared to the systems of government direct regulations, maintains a substantial degree of decentralization of decisions.32 When taxes are placed on the polluter, the polluter's cost function would be brought to a level which would have been achieved if he was to also face the social costs of Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 5. 31 Ibid., 6. 32 Randall, 1974, "Coasian Externality Theory in a Policy Context", 36. 36 production. In other words, the polluter pays the cost and is thus encouraged to reduce his output to a socially optimal level.33 The Pigouvian insight is reflected in the standard economic approach to externalities such as the effort to use economic incentives -taxes and subsidies - to bring the water resource into a market system. The rationale is that if the water resource is appropriately priced, it would be used in an economically rational manner as the prices would indicate its opportunity costs and would thus affect the whole complex of decisions about its use.34 Such market-based decisions are believed to result in water use efficiency which in turn allows for optimal allocation and at the same time help achieve a given level of environmental quality at a lower overall cost to society. Another benefit commonly witnessed is that, faced with higher costs of water use, consumers (especially large users such as industries) will be encouraged to search for least cost alternatives and find it worthwhile to invest in the development of new and more efficient means of water use such as water-recycling technology, pollution-control technology and expertise. Although the Pigouvian approach proves to provide a substantial degree of decentralization of decisions when compared to the direct regulation system, it's suggested degree of central decision making has been criticized by Coase (1960) as still being higher than desired. Coase believed that literatures on externalities up to that time had a tendency to view external diseconomies as a moral issue and as a result those works asserted the Pigouvian proposal for the solution which duly constitutes the authority for the government 33 Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 5. Anderson et al., 1977, "Environmental Improvement through Economic Incentives", 28. 37 to punish the offender. On the other hand, Coase refuted the Pigouvians with the argument of the reciprocal nature of externalities and the concept of transferable liability rules.36 By introducing the concept of transferable liability rules Coase has also brought about a crucial element of analysis, one of property rights specification. Because Coase identified the problem of externalities as the absence of markets and the associated property rights, his basic idea was that "An economy in which every asset is owned would internalize all externalities".37 The assertion put forth by Coase and his supporters was that the appropriate solution would be a perfectly decentralized system, one which the price as well as the quantity of externality are left to be determined entirely by the market forces.38 Because Coase believed that the market solution method would remove the allocative significance of government decisions, he concluded that such a system would also minimize the dependence on government for information and the bureaucratic faults likely to occur in resource allocation decisions. In other words, market-based mechanisms such as water-pricing allow the market rather than the government to determine the water allocation decision. It is clear that the Pigouvian and Coasian approaches differ in their mechanisms proposed to overcome externality problems. The Pigouvian approach is in favour of a system whereby the government and its civil servants are the determinant of affected parties, the evaluator 35 Randall, 1974, "Coasian Externality Theory in a Policy Context", 37. 36Ibid., 37. Coase attempted to amoralize the question of external diseconomies and introduced the concept of transferable liability rules on the grounds that "If property rights with respect to liability for damages are clearly specified, transferable and rigidly enforced upon appeal, under any given liability rule, one or the other party will have an incentive to attempt to modify the externality by offering inducement to the other party to behave differently. Negotiations for exchange of property rights in the externality will continue until all gains from trade have been exhausted. Given perfect competition, an efficient solution will be achieved". 37 Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 6. 38 Randall, 1974, "Coasian Externality Theory in a Policy Context", 37. 38 of the situation, estimator of the costs and benefits to each party, and the imposer of a supposedly optimal tax on polluters. Quite the contrary, the Coasian approach emphasizes reliance on the market as the facilitator of the bargaining between the affected parties. In this respect, when a disagreement occurs, the dispute is interpreted as one about the definition in terms of their respective property rights.39 Therefore, the court and the legal process involved provide the means for conflict resolution. In such processes lawyers and judges assume roles similar to those of the Pigovian civil servants.40 2.33 The Implications of Demand-Management According to Dziegielewski and Baumann, the essence of water demand-management measures lies in the reduction of water use and loss.41 From this reduction of water use and loss arise the benefits of demand-management measures. Some benefits could result from the reduction in water-supply costs as demand-management measures will allow for the reduction in short-term incremental costs of water supply and wastewater disposal likely to be incurred without the demand-management measures.42 From the water utilities' point of view these costs are generally variable costs such as labor, material, energy, and chemicals, and hence not associated with the costs of capital facilities. On the other hand, reduction in the long-term incremental costs of water supply and wastewater disposal can also be anticipated.43 They are capital costs; those associated with 39 Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 7. 1 Dziegielewski and Baumann, 1992, "The Benefits of Managing Urban Water Demands". 42 Ibid., 36. 43 Ibid., 36. 39 providing capital facilities for water supply and wastewater disposal. It is believed that the capital costs which in the long-term depend on the design capacities that would vary according to changes in the patterns and levels of water use, could be the major benefit of a demand-management program as they result in foregone costs of new supply facilities.44 Energy-cost savings are another benefit of demand-management indirectly related to the reduction in water use, as for example when demand-reduction alternatives result in decreased use of heated water. As water conservation can constitute an additional source of supply, it will help, in some areas, to reduce water extraction from aquifers and possibly from rivers, thus allowing an increased amount of water for environmental purposes, especially for preserving water quality. 2.34 Systematic Analysis Process for Demand Management From the experience of southern California and other urban areas of the United States, water planners have developed a process of a systematic analysis of demand management alternatives. This process consists of five analytical steps which Dziegielewski and Baumann cite as: 1) analysis of water-use and service area data; 2) preparation of baseline water-use forecasts; 3) screening of demand-management practices; 4) analysis of the benefits and costs of demand-management programs; and 5) development of a long-term water-management plan. This process allows water-supply agencies to determine the optimal level of reduction in water demand and therefore to formulate viable demand-management alternatives for water management planning in the long run.45 Li particular, the analysis of water-use and service area 44 Dziegielewski and Baumann, 1992, "The Benefits of Managing Urban Water Demands", 36. 45 Anderson et al., 1977, "Environmental Improvements through Economic Incentives", p.8. 40 I i data provides a better understanding of the factors that influence current water-use, thus making it possible to determine the way in which to make permanent changes in water-use patterns. In practice, each demand-management alternative is associated with a proposed implementation plan indicating the agencies responsible, the time of implementation, the coverage of the program, and the specific actions necessary to execute the program.46 It is therefore the case that all control programs, either by direct regulation or market-based instruments share certain legislative, administrative, technical, and judicial aspects.47 For effectiveness, a legislature must take all steps necessary to enact a valid law in establishing a control program. To administer any program, administrative infrastructures must be created involving a certain extent of bureaucracy and additional rule making by the regulatory agency. Monitoring the quantity of water use, wastewater discharges or ambient quality also implies that judicial oversight is required. Pursuing any of these activities involves additional transaction costs. 2.35 Not All Water-Reduction Practices are Desirable It has been pointed out by Dziegielewski and Baumann that not all practices that reduce water use or loss should be considered desirable.48 For a reduction practice to be justified, the benefits resulting from water use or loss reduction must be greater than the adverse effects associated with the commitment of other resources to the demand-management effort.49 Ideally, the objective in balancing current and future water supply and demand should be to Dziegielewski and Baumann, 1992, "The Benefits of Managing Urban Water Demands", 37. Anderson et al., 1977, "Environmental Improvements through Economic Incentives", 8. Dziegielewski and Baumann, 1992, "The Benefits of Managing Urban Water Demands". Ibid., 8. 41 determine the optimal combination of supply and demand alternatives from the social, environmental, and economic perspectives. In other words, water demand management programs should provide alternatives where future supply and demand can be balanced at economic, social, and environmental costs below which they would be incurred in new source development. This seems to make perfect economic sense (see appendix). However, in practice, the process of policy decision-making is inextricably linked to political issues such as interest groups politics, institutional arrangements, administrative capacity, and in some case equity. These political issues, in part, determine the feasibility and thus the adoption of such policy measures. A most interesting example is the case of water-pricing which has become a controversial demand management mechanism for Thailand. While it has been proposed as a very sensible alternative economically, it has also been criticized to be socially and politically unfeasible. This chapter now turns to explore the concept of water pricing and its crucial elements before proceeding to look at the various issues which water pricing faces under the claim that it is unacceptable socially and politically. 2.4 Water-Pricing; a market-based system of Demand-Management Over time, various mechanisms of economic-incentive have been devised to provide market-based solutions. They generally fall within one of five major categories: charges, marketable permits, deposit-refund systems, market barrier reductions, and government subsidy 42 elimination.50 The most commonly recognized mechanism is charges on resource consumption and use. Water charge is also refered to as water tariff or water price. Water pricing, when appropriately designed, is believed to be the technique which will reflect to consumers the true cost of maintaining or extending the provision of water services. Because when water is priced, consumers are conditioned to decide based on costs, whether the service is desired or what quality and volume should be provided. This enables the market to determine water allocation decisions and curb water consumption patterns accordingly. Through water price the value of the water resource is incorporated to reflect the true cost involved in the water use and this cost to users is believed to encourage more sensible use of water by which improved allocative efficiency would ultimately be achieved. The merits embedded in a system of water-pricing have been highlighted in the literature, but it appears that a no less important implication of water price which is crucial at the level of policy decision-making have not received as much attention; that is the issue of equity. In this respect, the economic literature on water-pricing has not provided much contribution as Randall comments that "...value neutral economic theorists have not been much impressed by equity arguments. To impress one's fellow economists, one needs to marshall arguments stronger than equity per se".51 Literature reviews indicate that studies which advocate water pricing as a major mechanism for water demand management generally take an economic approach whereby the prime objective of water pricing is deemed to be the economic allocative efficiency of water 50 Stavins, 1990, "Innovative Policies for Sustainable Development in the 1990s: Economic Incentives for Environmental Protection", 6. 51 Randall, 1974, "Cosian Externality Theory in a Policy Context", 42. 43 resources. Three factors are commonly considered to indicate allocative efficiency: 1) the marginal value of water units allocated should be equal; 2) the opportunity cost of additional resources needed in the operation to increase output should be less than the benefits; and 3) the balance in allocating the economy's capital investment should be appropriate. 2.41 Economic Approach to Water-Pricing According to economic assumptions, when water is appropriately priced to reflect its true value, it will induce significant reductions of wasteful demands because it encourages rational use and allocation of water resources. In this respect, appropriate pricing should ideally be based on the system of marginal cost pricing. Such systems require that the water price reflect the incremental costs imposed on the community in providing that marginal unit of water. To accomplish the prime economic objective of water pricing the marginal value of each water unit extracted or used should be the same and thus the unit price of water should equal marginal cost. In the case where marginal value is unequal, the water service must be reallocated to the user or usage which offers a higher net income. Only by this reallocation would the welfare of the society as a whole be maximized.53 The calculation of such price is, however, far from practical in a real world water market. A study on pricing of water services in various countries of the Organization for Economic Co-operation and Development (OECD) found that deviations from the principle of marginal cost pricing are inevitable.54 A compromise pricing system that would more or less 52 Herrington, 1986, "Pricing Water Services", clearly explains this economic approach. Ibid. This is explained in more detail by Herrington under the concept of efficiency. j 54 Ibid., 13. 44 i account for the principle of marginal cost pricing is that of increasing block tariffs. The volumetric component of the increasing block tariff, however, requires a measurement device -most commonly used is metering. Another factor considered under the economic approach is the opportunity cost of the additional resource needed in expanding output. This must be incorporated into the tariff to reflect the true cost of the extra output as these resources would be unavailable for other use in the economy. Economic efficiency in this case occurs when the benefits of the extra output outweigh the opportunity costs. The appropriate balance in the allocation of the economy's capital resources reflects the measurement of the costs arising from investments in water service facilities against other investments in the economy. These costs which include capital costs, operating costs, and environmental impact costs must be measured. The investment is justified when the anticipated benefits outweigh the anticipated costs for the investment. When talcing into account the environmental impact, this principle supports the argument that the benefits resulting from building new supply systems do not make the method of supply expansion a justifiable alternative. For this reason, demand-management methods based on pricing are becoming more widely accepted. Most studies on water management, however, suggest that water-pricing either in the form of water tariff or pollution charges remain underutilized. 45 2.42 Objectives of Water-Pricing Theoretically, in establishing a water-pricing system, some typical objectives underlie the design decision. They are usually the concerns about revenue generation, environmental efficiency, economic development, and public welfare.55 Revenue Generation: One of the first purposes of water-pricing is to generate the income to finance the water agency's incurred costs in administering the water delivery system. These costs56 generally consist of 1) customer costs: those costs incurred when connecting a customer to a supply system regardless of the subsequent level of use; 2) commodity costs: those costs which vary according to the number of water units consumed; 3) capacity costs: those costs associated with the provision of water, distribution, storage, sewerage, and treatment, generally subdivided into base-load-related costs and system-peak-related costs; and 4) common costs: those costs incurred in the operation of the system, usually known as overhead or administrative costs. Water utilities are generally concerned that these costs be sufficiently covered by the price structure. Environmental Efficiency: Where environmental efficiency is concerned, the major argument usually revolves around the fact that water consumption and use must be priced to the level which reflect the value of the resource in order to prevent wasteful usage. It is believed that appropriate pricing will result 55 Levy et al., 1993, "Improving the Efficiency of the Bangkok Water System through Demand Side Management and Repricing", 36. 56 Herrington, 1987, "Pricing Water Services", 37-38. 46 in sensible use of water because consumers would be encouraged to seek alternatives to reduce their costs. In this respect, an additional source of supply would be made available, thus prolonging the need to develop new water sources, especially the construction of large-scale dams which are seen to cause substantial environmental degradation. Economic Development: In terms of economic concerns, when economic growth is the main development goal, it is common that water pricing is used as a mechanism to encourage investments. Some areas promote economic development by providing incentives through offering low rates for water services.57 This can have negative impacts on water resources as the unrealistic price of water will encourage inefficient use by commercial and industrial enterprises and at the same time require heavy subsidies from water agencies. However, there have been arguments that uniform water pricing contributes to inefficient development patterns. On the contrary, if water price is allowed to be kept lower in some areas it can encourage future development to occur in locations which are suitable from the perspective of efficient water resource allocation.58 Public Welfare: Where equity is an issue, water-pricing may be subject to national public utility policies in countries where low income citizens must be ensured access to fundamental services. Access to potable water is considered as a basic right of all people and an important part of a 57 Herrington, 1987, "Pricing Water Services", 37. Saunders and Warford 1976, as quoted by Levy et al., 1993, "Improving the Efficiency of the Bangkok Water System through Demand Side Management and Repricing'',38. 47 public health strategy. Consequently, water pricing policies generally involve a commitment to provide citizens below certain income standards with a level of water service on a low or no-charge basis.39 A concern about equity can also result from insufficient water services. Examples from some developing countries have shown that insufficient water services usually have negative impacts on the urban poor. Li such cases, the level of access to potable water is drastically uneven, with the urban poor being forced to purchase water at significantly high mark-ups from wealthier consumers who can afford piped connections or from water vendors.60 Such circumstances call for particular water pricing policies that take into account the need to better allocate clean water to certain disadvantaged social groups. 2.43 Water- Pricing Models: Over time, various water pricing models have been devised to accomplish the objectives of either revenue generation, environmental efficiency, economic development, or public welfare and equity. More often than not, the pursuit of one objective generates conflict with another. However, it is notable that water-pricing systems are generally considered an economic technique which function in a market setting and therefore, the prime concern in devising a price structure is to ensure that it provides the correct signal to consumers about the costs involved in the use of the resource. With the assumption that consumers would react rationally, it is believed that certain pricing models would result in certain patterns of consumption. 59 Levy et al., 1993, "Improving the Efficiency of the Bangkok Water System through Demand Side Management and Repricing", 38. iter Markets, Market Reform, and 48 Crane, 1993, "Wat r r ts, r t f r ,  the Urban Poor: Results from Jakarta, Indonesia", 4. Types of Pricing Models: There are basically six types of price models which have been devised for the structuring of a pricing system: flat rate models, average cost, two-part tariff, declining block tariff, increasing block model tariff, and peak demand/seasonal rates.61 Of the six price models, the flat rate system is the least demanding for a sophisticated administrative system. However, because the flat rate system does not take into account the consumption volume, it is criticized for failing to encourage water use efficiency. Under the flat rate system, customers are charged a fixed charge regardless of their water consumption volume. The basis used for determining the rate can be the number of pipe connections, size of inflow pipe, number and type of fixtures and water use appliances, size or value of property, number of residents or number of rooms. This type of rate model is generally the only feasible alternative where there is lack of a metering system or a sufficiently sophisticated administrative capacity. A step up from the flat rate system is the average cost pricing. In this case the total costs to the agency divided by the number of water units projected to be sold results in a per unit cost. However, its drawback is that the revenues generated could be insufficient to cover expenses of the water agency when the actual water demand is lower than projected and it cannot account for the peak demand usage that the utility's capacity must accommodate. Some water agencies prefer the two-part tariff model which is a combination of a flat rate and average cost pricing. The flat rate is charged on the basis of consumer type or service connection. On top of that is the commodity charge which varies according to the water consumption volume. Levy et al., 1993, "Improving the Efficiency of the Bangkok Water System through Demand Side Management and Repricing", 41-43. 49 Two other types of price models are those presently used in the Thai water price structure. The decreasing block tariff usually consist of two parts: a fixed charge and a per unit commodity charge; the per unit rate declines as the water consumption volume increases. This system is strongly criticized for encouraging inefficiency and inequity in water use. It is the model presently used to accommodate the industrial sector in the Bangkok Metropolitan Region (BMR). On the other hand, the increasing block tariff is the model presently used in Thailand for the price structure charged to residential consumers .This system is sometimes refered to as the progressive tariff. While also consisting of two parts: the fixed charge and the per unit commodity charge, the increasing block tariffs per unit commodity charge works in an opposite direction to that of the declining block tariff; it's per unit rate increases as the water consumption volume increases. The part of the fixed charge, on the other hand, is usually set at below-cost in order to guarantee lower-income consumers access to a minimum water service. The price rate model which is the most demanding on monitoring and administrative capacity is the peak demand/seasonal rate structure or also refered to as the time-of-use rate structure. Under this system, consumers are charged a premium for usage during periods of high demand. It is a structure which encourages consumers to reduce their consumption during peak periods and shift their use to an off-peak period in order to spread out the overall utilization of capacity. The World Development Report (1994) found that the increasing-block tariffs and time-of-use rate structures are the two most common options for water utilities to minimize the distortions in terms of efficiency and equity of achieving financial autonomy. However, it also 50 concluded that "The most effective structure is the simplest, in particular when monitoring and administrative capacity are constraining".62 Water-Pricing Models for Special Purposes: Other types of water price models have also been devised to serve more specific purposes such as to differentiate between consumer types or consumption requirements. Two such models appear to be of relevance to the present situation in Thailand. First is the differential rate by consumer type which at one level distinguishes between agricultural and urban water use. Although this distinction is made in the Thai water management system, the case is such that only urban consumers are subject to charges, while agricultural consumers are omitted from any type of charges. At another level of distinction, urban consumer types are further grouped into residential, industrial, commercial, and institutional consumers. This system applies to the case of the Bangkok Metropolitan Region (BMR) urban water consumers. Second is the differential rate by quality of water. This model has yet to be adopted in Thailand's water management system. However, it is one with implications of great relevance to the present Thai water allocation situation, especially for the urban/agricultural distinction, since it assumes that different activities may require different levels of water quality. For instance water used for agricultural purposes generally does not require the type of treatment necessary for water used in urban consumption. Therefore, differential rates by water quality makes it possible to devise a pricing structure whereby the difference in the quality is taken into account and reflected in the price charged for different qualities of water demanded by the different sectors. World Bank, 1994, "Infrastructure for Development", 48. 51 Furthermore, even among urban consumers, in cases where a large part of the water demand does not require potable water, a dual-supply system may be appropriate since it provides consumers of low-quality water the option of purchasing water at a lower price, and at the same time, alleviates the unnecessarily high demand on potable water. Different rates may also be applied based on the different characteristics of wastewater discharged, especially in cases where specialized treatment is required. This generally applies within the industrial sector. Residential water users are generally charged for sewerage and sewage disposal (S&SD) through their water tariff on supply services. The rationale of this system is that the volume of water consumed and that of sewage produced are directly related. Linking the charge for sewage to water tariffs offers the least cumbersome and least costly solution for measurement. However, this system generally does not apply to other types of consumers, particularly industries. Studies show that industrial activities contaminate a disproportionate amount of water and often discharge more harmful contents than residential consumers.63 Therefore, they should be charged based on both volume and quality of effluent they discharge. 2.44 The Implications of Water-Pricing: The complexity of water-pricing goes beyond that of just structural design. As mentioned before, the concept of water-pricing appears to make perfect sense economically. But its feasibility relies on forces usually stronger than what makes economic sense, forces usually Levy et al., 1993, "Improving the Efficiency of the Bangkok Water System through Demand Side Management and Repricing", 47. 52 refered to as political. Christensen suggests that for a viable and effective shift to a market-based system such as water-pricing, a society must consider two things: 1) that a pricing mechanism would create more optimal allocation means than what might already be provided by local institutions; and 2) that certain institutional reforms are required.64Because mechanisms other than prices have proved to be as efficient a system for water allocation, the concept of common property rights (which will be discussed at length in the next section) has been revived and proposed as an appropriate alternative as opposed to an economic concept of pricing. There has been evidence that water users through community institutions are capable of organizing and assuming responsibilities in operating and maintaining an efficient system for water allocation among themselves.65 However, this type of organization is more common at the local level such as villages where local resources are traditionally managed through collective action.66 Li terms of required institutional reforms, Christensen indicates that it is pertinent to recognize that market-based systems could only be viable if the institutions are developed to enable the coordination of water allocation according to market criteria such as the level of price. Such institutions involve laws, enforcement mechanisms, and the property rights system.67 The important point is that water pricing is not a neutral tool, as it works through a market setting with all its intrinsic inequalities. Therefore, the feasibility of water-pricing goes beyond simply devising a pricing system. Rather, more complicated factors must be considered such as the social relationships within which a water-pricing system is to be introduced. In fact, it is useful 64 Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 2-3. 65 Bottral, 1985, as cited in Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 2. 66 Wade, 1988, as cited in Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 2. 67 Christensen 1994a, "The Governance of Water Allocation Problems in Thailand", 3. 53 to identify the interest groups anticipated to be affected, and likewise, the degree of their influence in the policy decision-making process when determining the feasibility of certain policy proposals such as water-pricing. Because policies such as water-pricing, by their nature, will affect various groups in society, the analysis of its feasibility requires an understanding of which groups in society are involved, what their stakes are in this matter, what resources are available for their use to affect the decision-making process, and what is the nature of the various groups' relations. Such interest group analysis may be based partly on the implications of water pricing. As previously mentioned, the feasibility of water-pricing depends on more than economic justifications. Generally embedded in water-pricing systems are the implications in terms of society, politics, financing, and most recently a crucial and controversial issue, the environment. 2.5 The Implications of Water-Pricing from Various Perspectives 2.51 Social Implications The measures involving water allocation inevitably are subject to certain social concerns because water is a resource considered as essential for basic human needs. Socially, water pricing is controversial because of the concept of equity. Herrington identifies equity under two different notions: 1) social equity or income redistribution; and 2) provision of an equitable tariff system across consumer groups.68 Herrington, 1987, "Pricing Water Services", 26-28. 54 Social Equity: The concept of social equity is based on the argument that water supply and disposal is a basic human need. It is therefore a social requirement that access to safe water is ensured to all the population so that their basic human and sanitation needs are not threatened. In order to accomplish this, the social equity argument insists that water supply and disposal should be provided to consumers irrespective of their income, at a low and usually subsidized price. Through such a concept, some water pricing systems reflect the underlying objective to be income redistributive. The issue of social equity is most prevalent in the water pricing policy of developing countries where a large proportion of low-income population make it essential for governments to ensure that this concept be taken into account in policy decision-making. But whether income redistribution is to be incorporated into the water utilities pricing system depends on the perception of how far governments' responsibilities extend. If governments take it to be within their boundary of responsibility to provide general equity, the model which the water policy will adopt would likely be what Herrington calls the social service model. In this case the concern for general access to safe water and thus sanitation for public health would direct the course of decision making - water-pricing would likely be characterized by general subsidization. On the other hand, a quite different view prevails in developed countries where it is believed that the less advantaged population should be assisted through social security and taxation systems rather than through general subsidization for low water price. This is because income redistribution has implications for either general subsidization of the price charged by the 55 water utilities or higher tariffs for certain groups of consumers. In this case, governments may reduce their responsibilities by adopting a different approach - one which Herrington refers to as the business or public corporation approach. Under this approach, water services, either supply or disposal, are considered as inputs to the production process of various sectors in the economy, and as well a luxury to the households. Therefore, income redistribution is accomplished through higher tariffs imposed on certain consumer groups to assist others. This alleviates the government's role in providing its citizens equal access to safe water. Thailand exemplifies a case more of the social service model where social equity is reflected within the urban water allocation system and price structure. Thai politicians have used the argument of social equity to keep the price of water services at a level deemed to prevent the hardship that would occur to the low-income sector. However, the result of the extremely low price of water has gone beyond preventing hardship. In fact it has kept the one objective of water-pricing from working. That is that water price will encourage sensible use of water and curb wasteful long term water use patterns. Instead, the low water price has allowed the sector with the most profligate use of water to continue enjoying the luxury of being insulated from the higher costs of water service provision. There have also been attempts to extend the concept of social equity to the case of agricultural water use. With the argument that Thai farmers are, in fact, in the low-income sector of the population and that their livelihoods depend on water, many see that the introduction of water-pricing to agricultural water use would create hardship for the farmers. But counter to this argument is that farmers' present water use patterns are very wasteful due to the free of charge Herrington, 1987, "Pricing Water Services", 26. 56 system. So for more efficient water use in the agricultural sector, a pricing system must be introduced. Equitable Tariff System: The second approach - provision of an equitable tariff system - is a narrower concept of equity. It concerns the question of cross-subsidization and extends the explanation to two other concepts: parity and equalization. Parity is achieved when the revenue per unit of the water quantity provided is the same among various groups of consumers. Therefore, parity would exist when the water utility's revenue received between providing a hundred litres of water to the residential consumers and the industrial consumers were equal. On the other hand, equalization when carried to the extreme implies that water tariffs should be equalized across the whole economy irrespective of the difference in cost that it imposes on the supply system. A less extreme version of the equalization argument believes that equalization occurs when irrespective of the difference in service costs, all consumers in the same area are subject to an equal tariff per unit of consumption. In cases where the unit of consumption is not measured, as in a lack of metering, equalization occurs when an equal per unit tariff is imposed on consumers based on other factors, such as the capital value of related properties. In some cases, certain tariff systems may be designed based on the argument of one of the four following equity concepts: 1) what tariff a consumer is charged should be determined by their ability to pay; 2) the tariff a consumer is charged should reflect what the value of the service is to them; 3) consumers should be charged a tariff equal to the economic costs imposed on the service system and the community by their 57 demand; and 4) consumers of different generations should be charged a respectively different tariff. In Thailand, the equity argument for the present water allocation system is based more on a social service model. The existing price structure of water services categorizes its charges by customer type. Therefore, the approach of providing an equitable tariff system has not been of any influence in the Thai water-pricing strategy. 2.52 Political Implications Water-pricing like any other policy is subject to political approval. Reforms such as organizational changes that are needed to successfully implement a water-pricing policy would not suffice without political support. When the World Development Report (1994) concluded that one most crucial factor which determines the success of providers of public services is financial independence, it also stated that this could be achieved through a pricing strategy designed to ensure cost recovery.70 However, it was careful to point out that many public utilities are kept from recovering costs because of political constraints which is clearly the fact that "Low prices are popular among those who receive a service even if they are willing to pay more".71 This is also the case of Thailand's water-price system where the price of water services is kept low with the support of politicians whose arguments appear to be for the social services to the low-income sector but where the result is an across the board subsidization. World Bank, 1994, "Infrastructure for Development", 49. Ibid., 49. 58 Political Constraints: Political constraints in the area of water-pricing policy involve several complex issues such as conflicts with other government priorities or policies, which make it difficult to become an agenda item for policy consideration, the administrative costs and requirements it will pose, the essential institutional design it will require, and the interest group politics involved in policy determination. It is common within the arena of policy options that the objectives of one policy be maximized at the expense of other policies. Where the prime objective of the government is to foster economic development and growth, government policies will tend towards providing the industrial and agricultural sector with subsidized utility prices such as with water. Thus short-term goals are given priority over long-term resource allocation efficiency in such policy decisions. Even between sectors, the protection provided to accommodate each sector could mean conflict of policy interests between those sectors. Numerous cases have shown water resource allocation to be a major source of conflict between the agricultural and industrial sectors. When national policies are driven by the task to achieve high Gross Domestic Product (GDP), there are usually arguments for greater allocation of resources towards the sector which contributes to a higher percentage of GDP, in most cases the industrial sector. But where national interest is in securing food production, the agricultural sector is likely to receive priority in policy decisions. Because a major objective of water pricing is to encourage efficient resource allocation, it runs a high risk of being in conflict with other government priorities. Furthermore, the impact of higher water prices would be felt immediately by those groups affected. Its 59 achievement may then have to be compromised with other policies which allow the government to gain credit or political popularity from its outcome. The level of policy affect on each interest group would vary according to each group's interest at stake whereas the level of influence that each group could have on the policy decisions would vary according to its political involvement. As a result of possibly being in conflict with other government policies either those in existence or those to be considered, water-pricing is in competition with other government priorities to get on the agenda as a policy option. Anderson suggests that the success or failure of getting certain policy proposals on the agenda is a question of 1) whether the politicians are averse to new policies and are just unwilling to adopt such a policy; 2) whether the politicians are merely misinformed; and 3) whether the new policy proposed presents policymakers with more complicated political problems than the existing policy it is to replace.72 Efforts Needed to Overcome Constraints: The obstacles that a policy proposal such as water-pricing have to overcome will require efforts on the proponents' part. Anderson identifies these efforts to be the refinement in the basic concepts, the persuasive advocacy by proponents, and the establishment of support among academically influenced government consultants.73 Initial acceptance of a policy proposal depends, in part, on the general public's and politicians' understanding of its basic concept. One of the most common obstacles to the initial acceptance is that the general public and the politicians are presented with a proposal that appears complicated. This is because proponents Anderson et al., 1977, "Environmental Improvement through Economic Incentives", 147. 73 Ibid., 149. 60 from different professional backgrounds would propose policy objectives and rationales from their different professional perspectives. In terms of administrative demands, it is usually the case that in its pursuit of allocative efficiency, water-pricing must be accompanied with a more comprehensive means of administration. A pricing system which is theoretically appealing because of its calculated cost-effectiveness or economic efficiency resulting from changed water use patterns may in practice only be achievable through enormous administrative costs. Examples of such obstacles are apparent in developing countries where the benefits of water-pricing are outweighed by the greater cost required to administer the system such as the cost of installing, maintaining, and policing water meters. A comprehensive administrative process is required because of the need for more precise monitoring to hold consumers accountable for their part of consumption. To ensure compliance, a certain amount of administrative resources must also be allocated to administer preventive measures to protect the meters from being tampered with and to detect false reportings of consumption. On the other hand, government institutional and legal approaches to water use can have significant effects on allocative efficiency. In fact, Roger suggests that whichever alternative governments decide to take in providing water more efficiently, they must first reform their institutional and legal approaches to water use.74 Presently, most institutional arrangements are characterized by the diffusion of control among a myriad of agencies that oversee overlapping aspects of water use. Further aggravated by the lack of coordination among agencies and lack of integration among their plans in practice, the present institutional approach to water resources 74 Rogers, 1986, "Water Not as Cheap as You Think", 32. 61 have lead to overall inefficient water use. Integrated planning is significant in cases of water-pricing because pricing public water services could have significant impacts on consumers' decisions to turn to other alternatives with possible negative outcomes. The BMR's water-price structure reflects the lack of coordination between the agencies supplying piped water (MWA and PWA) and the agencies in charge of groundwater (DMR). To substitute the more expensive public water service, in such cases, BMR consumers have turned to extensively exploit the aquifer beyond its replenishment rate. This has lead to increasingly more complex problems, requiring even further coordination among the various agencies. If the water resource is continued to be managed under the present lack of an integrative institutional approach, it is very likely that water-pricing will create a vicious cycle of problems rather than generate the positive impact intended. Water pricing may not be a new policy but the underlying purpose for pricing - to provide more allocative efficiency by changing water use behavior - may be a new burden to those groups who hold a stake and are likely to be severely affected by the policy outcome. This is because water-pricing generally implies that consumers are to be held accountable for a higher cost of using the resource. A study on pricing water services indicates that one of the most important principles of water-pricing is consumer acceptability.75 Consumer acceptability implies that a tariff or charge system must be comprehensible to consumers. 75 Herrington, 1987, "Pricing Water Services", 31. 62 2.53 Financial Implications One of the basic financial objectives in establishing a water-pricing system is to generate revenue for the water utility to cover its costs incurred in its provision of the water delivery system. An additional financial objective may be to procure a certain rate of return on investment for financing future capacity costs plus profit in the case of privatized systems. An alternative that water utilities may choose in order to achieve financial independence is to generate high revenue - enough to cover its full cost of capital investments. However, higher tariffs would imply that the current customers are to bear the burden of the required investments needed to serve future customers. This is usually the case where resistance to higher water tariffs becomes a political issue. The argument is that governments are obliged to balance many different economic, social, and political objectives, including economic growth, poverty reduction, and protection of the environment.76 For this reason, it has become common that most water agencies are unable to generate sufficient revenue to cover their full costs. This is further aggravated by the demand for the development or expansion of water supply projects. It is estimated that for urban areas in developing countries to produce an additional unit of water through a new water supply project, they would have to bear a per unit cost of approximately two to three times that of the existing system.77 This higher cost is usually a result of the investment needed to transfer water from distant sources and the additional expense required to treat water supply of lower quality. 76 Herrington, 1987, "Pricing Water Services". Bhatia and Falkenmark 1992, as quoted by L through Demand Side Management and Repricing", 37. evy 1993, "Improving the Efficiency of Bangkok Water System 63 Financial Concerns and the Nature of the Organization: It appears that the extent to which the water tariff is used to finance the costs incurred in providing the services generally depends on the water agency's policy objective and the availability of other sources of revenue.78 This in turn depends on whether the water utilities are operated by the public sector or the private sector. Public Provision When operated by the public sector, national policies concerning public utilities may be the key determinant of the financial objectives. Normally, the concept behind government operated utilities is that public services are most suitably produced and serviced by a single entity because the economy of scale - the unit costs decline as output increases - can be achieved by monopolies. This is a situation commonly referred to as "natural monopoly". Therefore, the government most often assumes the role of sole supplier of public utilities. In such cases, the financial status of the utilities would depend on budgetary decisions. It is also quite common that when the utilities depend on general tax revenue as their financial source - not only do they lack financial independence - they also are in competition with other governmental priorities.79 This proves to be cumbersome for long-term management planning. Water utilities' financial policies when subject to national public utility policy are usually characterized by earnings of minimal gross return on capital - normally just sufficient to cover nominal interest payments and the replacement of assets at the current costs.80 Such has generally been the case of many developing countries, including Thailand. However, the World Development Report (1994) Levy et al., 1993, "Improving the Efficiency of Bangkok Water System through Demand Side Management and Repricing", 36. 79 Ibid., 39. 80 Herrington, 1987, "Pricing Water Services", 29. 64 suggests that a new consensus is emerging from a reevaluation of the public sector; that market forces and competition can improve the production and delivery of public services.81 Market forces and competition may be encouraged by ways of running the public sector under business principles. But the compelling examples of poor public agencies' performances have lead many to argue for shifting the efforts from reforming the public sector to the increased reliance on the private sector to provide public services.82 Privatization When operated by the private sector, the financial objective of the water utilities is generally determined within the terms set by regulations to prevent monopolistic exploitation such as excessive tariffs. Two most common options for the private sector to play a role in providing public services are public ownership with private responsibility for operation or private ownership and operation. The approach to either option is generally refered to as "privatization". Financial concerns appear to be an important reason why governments in several countries have turned to privatize the provision of public services. Privatization generally involves"...the transfer of assets from one set of owners (the government) to another (private shareholders). It does not introduce new property rights (a la Coase). Rather, it changes the nature of existing property rights".83 For these reasons, whether privatization will have an impact depends on the incentives and constraints that the owners are faced with. However, the consequences of privatization, in terms of eflSciencies from changing 81 World Bank, 1994, "Infrastructure for Development", 52. 82 World Bank, 1994, "Infrastructure for Development", 37. 83 Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 11. The majority of information on the subject of privatization are drawn from this source. 65 incentives and the shift of government control to shareholders, are still not well understood. Supports of privatization are usually based on two arguments: that government-operated enterprises tend to over-produce and underprice and that private control of resources results in greater efficiency. The perception that public ownership tends to over-produce is based on the fact that government objectives in providing public utilities generally reflect considerations other than profit maximization. Instead, there is more consideration to maximize output which most frequently leads to the over-provision of utilities. On the other hand, privatization is seen to help reduce output because the private sector normally has profit objectives and faces a higher cost of capital than the government. The higher cost of capital is believed to translate into higher discount rates and thus induce shorter-term investments.84 In this respect, the high discount rate will supposedly raise the price of the utility - in this case water - therefore, reducing consumption at the margin. As for the perception that private control of resources results in greater efficiency, three arguments are used to support such claim.85 One is that under private ownership more output will be produced from given inputs hence less demand on natural resources. Secondly, the ratio of capital to labour within private firms will be at a level closer to optimum than in the case of public firms and consequently costs of production of environmental improvements will be reduced. Thirdly, over-production will be eliminated since prices as well as outputs would be more reflective of costs. Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 11. Ibid., 11. 66 The reason why governments are increasingly resorting to privatization may in fact be best explained by Helm and Pearce's conclusion that "The final and perhaps most important aspect of privatization is its impact on regulation".86 To the question of whether regulation is easier to impose and monitor in the public or the private sector, Helm and Pearce suggested that "The intuitive and conventional answer that greater control is engendered through ownership is highly misleading. It may be much better not to own the regulatee."87 Generally, governments are susceptible to public utilities' financial performance and are expected to be responsible for their performance. Therefore, it is common that governments end up having to defend their records. However, when enterprises are privatized - as in the case of Britain's water utilities -governments must still oversee the quailty of services but are not financially responsible to the shareholders of the utilities. In other words, one could say that the quality of privatization depends on the quality of regulation. Though there is much to gain from privatization, the disadvantages have been observed to be the possible offsetting cost that may be created by the strategic behavior of regulatees and the reduced access to information needed to monitor performance. However, overall evidence from the case of the United Kingdom88 suggests that regulation has been significantly improved through privatization. Helm and Pearce, "Assessment: Economic Policy Towards the Environment", 12. Ibid., 12. Ibid., 12 67 Source of Revenue How much emphasis is placed on recovering costs through water tariffs also depends in part on the available sources of revenue. The sources of revenue used to finance the utilities' water management are generally multiple; they include water tariffs, tax revenues, bonds and loans, equity capital, intergovernmental grants and subsidies, and investor ownership.89Because past experience of some municipalities have shown increases in water tariffs to result in additional reduction in demand, water utilities are subject to criticisms for not raising their water price.90 Generally, it is believed that water utilities should raise their water price to a level which would discourage wasteful water usage. However, it is not that simple in practice. In countries such as Thailand water utilities either publicly or privately operated do not have the authority to raise prices for the purpose of discouraging water use. Only by stipulations through laws and regulations would they be allowed to recover their costs through water tariffs. Price increase in general is allowed only when there appears to be pressures from revenue-shortfall significant enough to be unremediable by subsidies. Water utilities in Thailand are still limited in terms of their financial independence to consider using water tariffs as a means to encourage conservation. 2.54 The Environmental Implications: The environmental concerns in today's resource management arena have brought about the argument that the traditional commercial and urban water usage must no longer take 89 Boland 1983, as quoted by Levy et al., 1993, "Improving the Efficiency of Bangkok Water System through Demand Side Management and Repricing", 38. This is clearly elaborated by Dziegielewski & Baumann, 1992, "The Benefits of Managing Urban Water Demands'', through the experience of water institutions in Southern California. 68 priority to environmental usage. Therefore, water-pricing must reflect the opportunity costs which involve other components of environmental value of water use, those of ecology, recreation, and aesthetic. The ideal water tariff must then reflect the true cost which incorporates the environmental aspect of cost in providing public water supply. This is believed to promote a more sensible use of the environment (especially in the case of water resource where depletion can occur) and thus allow for a more long-term outlook to resource management. Negative Environmental Effects: On the other hand, water-pricing can have negative environmental effects if not managed properly. In cases of water-repricing, where the price of water services is increased, customers may find themselves in a position to seek other alternatives such as private groundwater extraction. This alternative when intensively used to substitute public water supply may lead to more environmental problems in the long-term. Studies on water-pricing's environmental effects also indicate that decreased water use as a result of increases in water price may cause reductions in the volume of sewage effluent flow. Lack of prompt preventive measures could make the sewer system susceptible to the sedimentation of accumulative solids, further corrosion and odour problems could result from methane and hydrogen sulphide gases generated by anaerobic decomposition.91 These types of problems are generally assumed to be the result from market failures and thus environmentalists have typically argued for greater state intervention.92 However, there have been counter 91 DeZellar and Maier, 1980, as quoted by Herrington, 1987, "Pricing Water Services", 123. 92 Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 10. 69 arguments that " failure only justifies intervention if the costs of the failure are greater than the resultant costs of government failure consequent upon the intervention".93 One other proposed response to market failure is to extend the market by the application of property rights. The study now turns to examine this issue. 2.6 Proper ty R i g h t s : The major issue concerning the feasibility of water pricing in Thailand which Kaosa-ard as well as Christensen claim to be the fundamental problem is the fact that water is an open access resource in Thailand. There have been recommendations that clearly defined property rights to water in Thailand is a pre-requisite to the feasibility of water pricing because "... a natural pricing system depends crucially on the institution of ownership".94 To fully understand this statement, the concept of property rights to water must first be defined. 2.61 The Concept of Property Rights to Water: Water resources, by property right regimes, are can be held within four distinguishable categories: 1) private ownership; 2) state ownership; 3) common ownership; or 4) open access. Each form is determined by a combination of factors such as a society's physical characteristics, legal development, social organization, and political-economic conditions. In Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 11. 94 Dales, 1993, "Land, Water, and Ownership", 226. 70 practice, however, it is more common that a mixture of the four property right regimes characterizes the form of property rights to water. Private Ownership: Private property as applied to water resources is usually a form of ownership based on doctrines of European laws and more common in Western countries. They usually fall under one of two doctrines: the riparian rights doctrine or the doctrine of appropriation. Under the riparian doctrine the right of property to a watercourse is vested in the ownership of the land that adjoins the watercourse. Therefore, the right is usufructuary; the water body is not subject to ownership but one who owns the adjacent land to a watercourse is entitled to enjoy the use of the resource so long as the use is reasonable and not wasteful. In this respect, the water right alone is non-transferable. The limitation of riparian rights was recognized as the needs for water developed in non-adjacent lands became evident. As a result, a system of water rights not based on adjacent land ownership was developed. This system became the appropriation doctrine. The appropriation doctrine is based on the rule of "first in time, first in right" which started as a custom and eventually became the law. In other words, under the appropriation doctrine water right is acquired by use. Preference is given to earlier rights established over later users. In theory, appropriation rights are transferable but in practice, transfer of appropriation rights have been limited by various legislations which attempt to restrict the spillover costs likely to result from a free private market.95 Herrington, 1987, "Pricing Water Services", 79. 71 The disadvantage of the system of private rights to water appears to be the fact that it usually involves expenses incurred by court settlements. This has also resulted in much inequity as large water users are generally wealthier and can afford higher legal expenses than small users. State Ownership: Water in many cases is owned nominally by the state. The government then assumes the authority to assign or restrict the use of water in various ways. Water under this type of ownership is also refered to as restricted public property whereby certain types of use may be restricted but it remains a public property, as everyone is allowed to use it for their own purposes at no cost. However, there are cases where the government can choose to either sell the rights to extract water, distribute rights to extractors on other basis than auction, or administer a charging scheme on either actual extraction or authorized extraction. But in most cases the government prefers to maintain its control on water resources and therefore does not favour the transfer of water rights. Common Ownership: In general, water resources can be considered as common-property because they possess two important characteristics that all common-property resources share: 1) the exclusion of users or control of access to the resource is difficult; such as the case of groundwater where regulating the access may be costly or control may be problematic; and 2) each user's share in the resource can subtract the welfare of other users96; again, in the case of groundwater, the Berkes et al., 1989,"Common Property Resources: Ecology and Community-Based Sustainable Development", 7. 72 extraction by one user can affect other users because when the aggregate use exceeds the replenishment rate, the extraction costs become higher. Traditionally common property resources (res communis) are those resources collectively owned by a community. Therefore, the decision of excluding a non-member, or the method of resource allocation is subject to communal arrangements. The overexploitation of resources is avoidable through the commitment each individual has as a member of the community. Open Access: The confusion generally stems from the difference in the interpretation of the term common-property. While some scholars refer to common-property exclusively as the property classified as communally held, several recognize common-property as open-access, freely available to users. The latter definition is the one used in the law of most Western nations, common property is "owned by no one and belonging to everyone".97 This concept revolves around Hardin's (1968) model of "Tragedy of the Commons" which forms most of the scientific resource management and neoclassical economic analysis of the West. Two assumptions underlie this approach. One is that common-property resources are subject to open-access (res nullius). Under this view common-property resources are those resources not amenable to private appropriation98, but are freely available for everyone's use. The second assumption is that resource users will base their decision on self-interest rather than 97 NOAA as quoted by Berkes et al., 1989, "Common Property Resources: Ecology and Community-Based Sustainable Development", 7. 98 Berkes et al., 1989,"Common Property Resources: Ecology and Community-Based Sustainable Development", 7. 73 on community interest. Therefore, open access property is subject to the overexploitation by the individual and resource depletion is unavoidable unless the resources are either privatized or centrally controlled by the government. 2.62 Res Communis vs Res Nullius: The definition of common property resources, thus, falls within the spectrum of two different concepts. One is the concept that common property are those property subject to communal arrangements and therefore, exclusion rights at a community level is the norm. The other is the concept based on interpretations of common property in line with Hardin's idea of tragedy of the commons. In this study the term common property will be used to refer to the first concept which means communually owned or communally arranged forms of resource management (res communis). On the other hand, interpretations of common resources under Hardin's model will be refered to as systems of open access (res nullius). As mentioned earlier in this section that the form of property rights to water is more commonly a mixture of regimes, this is also the case for Thailand. Water resources in Thailand while subject to state regulations are not considered as strictly state property but rather are governed by an open access regime. This is because the state takes responsiblities in providing the infrastructure and managerial capacities in the allocation of water but does not exercise the authority to charge for the water it allocates. Therefore, raw water remains to be perceived as a free for all resource. This study will refer to the present system governing water resources in Thailand as one of open access. 74 2.63 Criticisms of the Neoclassical Economic Concept to Resource Management: Neoclassical economic principles underlie much of the analysis guiding contemporary policy decision making. Policies concerning water resource management are no exception. Neoclassical economic analysis is generally criticized under the concern that because certain environmental consequences from some development policies cannot be simply calculated into monetary value, various environmentally unsound development policies may be economically justified through economic techniques without sufficiently accounting for the true environmental affects. The value judgment implicit in the cost-benefit analysis is criticized for advocating that decisions concerning the natural resources and environment be justified by the criteria for maximizing economic wealth." Ecological criteria, on the other hand, reflect the concern for the valuation of intangible environmental benefits, those believed should be guided by ethical codes of conduct and not the economic technique of cost-benefit analysis. The difference in the philosophical basis of the two concepts concerning common-property mentioned above has brought about the different approaches and thus different criteria for defining the "appropriate" policies. It appears that the degree of success in managing the natural resource depends on more than the solutions proposed by Hardin and those reflected in the method of neoclassical economic analysis. But despite the fact that the neoclassical economic analysis has been criticized for economically justifying various development policies which are environmentally unsound, it nevertheless has important contributions for the area of water resources management. The economic analysis "Berkes et al., 1989"Common Property Resources: Ecology and Community-Based Sustainable Development", 153-154. 75 cannot be ignored in policy decisions. However, it should be complimented by other dimensions of analysis. Feeny et al. suggest that "evidence indicates that complex interactions among the characteristics of the resource, the property rights regime and other institutional arrangements, and the socio-economic environment contribute to the degree of management success".100 This also applies in the case of water-management. While water-pricing is an important component of the water-demand management alternative, it must be complimented by non-price measures in order to obtain the full benefit of the concept. 2.64 The Common Property Resource Argument: Hardin's solution to avoid resource degradation by converting common-property to private property or government regulation of uses and users has been challenged through evidence which indicates that "The success in the regulation of uses and users is not universally associated with any particular type of property-rights regime".101 Instead, the problems of resources and environmental degradation in the developing countries have been attributed to the mismanagement of common-property. Goodland et al. (1989) suggest three circumstances under which the mismanagement of common property resources in developing countries may occur: 1) loss of traditional Feeny et al., 1990, "The Tragedy of the Commons: Twenty-Two Years Later", 12. Ibid., 12. 76 common-property systems; 2) development through economically unjustified policies; and 3) development through economically justified policies.102 Loss of Traditional Systems: The traditional common-property systems are broken down through changes which disregard traditional value systems that encourage conservation. The population growth and the increased participation in the market economy has produced the pressure for overexploiting resources which are finite. Natural resources no longer are harvested to meet subsistence local needs, but are overexploited for exports encouraged through the market economy. The overexploitation of natural resources is further physically facilitated through technological change. Governmental incentives such as inappropriate pricing and subsidies which become common through increasing centralization of authorities have also proved to encourage the overexploitation of natural resources. These changes have all been used to describe the break down of traditional common-property systems, which in turn leads to the mismanagement of resources.103 Uneconomically Justified Development Policies: Another cause of common-property mismanagement stems from the development policies which are uneconomically justified. Such development policies are characterized by government incentives such as subsidies which serve to encourage the overexpolitation of Goodland et al., 1989, "Meeting Environmental Concerns Caused by Common-Property Mismanagement in Economic Development Projects", 149. 103 Ibid., 151. 77 natural resources. By both ecological and economic criteria it is believed that eliminating such subsidies will reduce several natural resource depletion problems. The argument which supports such claims is that the "economic efficiency" of natural resource policies would only occur when consumers of the resource are held accountable for the full economic cost to society by their consumption of the resource. The full economic costs or losses occurring from natural resource consumption are defined by Warford (1986) as the marginal opportunity cost (MOC).104 Goodland et al. (1989) state that "A price less than the MOC would stimulate natural-resource consumption in excess of the economically optimal level".105 Under this view, both the ecological and economic criteria suggest that common-property resources in developing countries are mismanaged in cases where development policies provide subsidies that either directly or indirectly encourage consumption exceeding the economically optimal level. Economically Justified Development Policies: The controversial issues lie in the third type of circumstance where common-property resources are mismanaged through economically justified development policies. Criticisms of these development policies suggest that although justified according to neoclassical economic criteria, such policies are unjustified on ecological criteria. Neoclassical economic criteria are those indicators used to provide measurements for the transactions in the market economy, such Warford, 1986, as quoted by Goodland et al., 1989, "Meeting Environmental Concerns Caused by Common-Property Mismanagement in Economic Development Projects", 151. 105Ibid., 151. 78 as cost-benefit analysis (CBA).106 Efficiency is thus defined as the resource use pattern which guarantees that the net benefits derived from the use by society as a whole is maximized. The principal of marginal cost pricing supports this rationale. Just as the marginal opportunity cost, the principal of marginal cost pricing implies that in order to achieve efficiency, at the margin or at the last unit of resource consumed, the price of the resource should reflect the incremental costs imposed on society in accommodating those demands or the savings that could be made if those demands are not accommodated. 2.65 The Government Failure Argument; Hardin's model of "Tragedy of the Commons" has been further challenged by conventional interpretations of common-property that experiences of tragedies of the commons are more accurately, the examples of government failure.107 It is pointed out that in several cases, the state's decision is particularly responsive to the interests of the elite.108 Based on the experiences in developing countries, the argument against Hardin's proposal for state control over common property, suggest that state-ownership has seldom shown any success. The professional resource-management infrastructure provided by the state is generally seen as insufficiently developed and the enforcement of regulations inefficient.109 106 Goodland et al., 1989, "Meeting Environmental Concerns Caused by Common-Property Mismanagement in Economic Development Projects", 150. Goodland defines neoclassical economic as the spectrum of more or less conventional, market-oriented capitalist economics. 107 Anderson, 1987, Marchak, 1988-1989, as quoted by Feeny et al., 1990, "The Tragedy of the Commons: Twenty-Two Years Later", 8. 108 Feeny, 1982, as quoted by Feeny et al., 1990, "The Tragedy of the Commons: Twenty-Two Years Later", 8. 109 Feeny et al., 1990, "The Tragedy of the Commons: Twenty-Two Years Later", 12. 79 Christensen's perspective of the Thai open-access regime to water appears to follow this line of thought. While claiming that the existing lack of property rights specifications to water in Thailand illustrates the issue of tragedy of the commons, Christensen believes that the government-provided intervention has worsened the situation. In his support for a market-based allocation system such as water-pricing, Christensen suggests that two things must be considered: one is that mechanisms other than prices such as traditional systems of local management of resources have in many cases proved to be efficient in its water allocation scheme and its management of conflict over water allocation. Therefore, advocates of market-based systems bear the burden of proof to illustrate that pricing can provide a more optimal alternative than what local institutions may already provide. The second thing that must be considered is that a shift to a market-based allocation system will require certain institutional reforms to make the introduction of the system possible and to enable the market to be viable. One of the most needed reforms is seen to be the specification of property rights to water. However, it should be noted that government failure is really a regulatory failure, with the basic question of who is charged with doing the regulation - the community, the state, or something in between. For Hardin and the supporters of his concept, this is the state because of its monopoly powers and administrative authority. The argument of government failure thus poses a crucial question of who can do it better. Christensen , 1994a, "The Governance of Water Allocation Problems in Thailand", 2. 80 2.66 Summing U P the Concept of Property Rights; Supporters of the common property concept view that a water price system administered by the government authorities confirms the fact that water resources are state governed and that the government has coercive power of enforcing any regulations concerning water resources. Rather than concluding that overexploitation of water resources stems from the failure to hold consumers accountable for the full market value of their consumption, the concept of common property resources sees the problem more as a sign of failure in the institutional aspects of government's centralized control of resources. To correct such failure the existing institutions would need to be reformed to entrust the responsibilities of resource management to its users. In fact, the neoclassical concept used to devise the solution for resource management has been criticized for its focus on determining externalities in the attempt to take them into account. More recent economic thoughts are moving towards the concept of ecological economics. At the same time, the contemporary concept of common property resource is becoming more recognized and studies in this area are emphasizing the revival of traditional institutions and the management of resources by the community of users. However, while the concept of res communis rights has become an alternative proposed to correct certain flaws of neoclassical analysis, it has been criticized for overemphasizing the traditional institutions and users' role without realistically questioning whether users under traditional social organizations are actually capable of performing the role required in resource management. Also subject to criticism is the fact that if the ultimate 81 goal of a system is to exert allocative efficiency then the common property resource system may not provide the best alternative as it has been noted that pricing practices under such collective systems tend to uphold equity rather than allocative efficiency.111 Cernea proposes that "The issue at stake is the presence or absence of forms of social organization structurally suited to manage and control the environment".112 In this respect, what is needed for improved management is a suitable form of social organization which encourages collective actions. In Cernea's view the global environmental movement does not offer this since it appears to be " in emphasizing individual action and preservation excessively while underestimating the sociological variables at play for achieving systematic coordinated action".113 For this reason, the establishment of a suitable social organization which involves the patterns of social relationships and institutional arrangements is a vital prerequisite. These patterns of social relationships and institutional arrangements may or may not be derived from "traditional" forms. However, only under the conditions that the patterns of social relations and arrangements of institutions are capable of enforcing norms and control would effective resource management by users be possible. But a suitable condition is not likely to be available in most communities and therefore it should not be assumed that resource users can simply take over the resource management tasks. It is partly the government's role to assist resource users by providing the macro policy tools to compel and encourage the system of management by resource users. Studies in this line generally fall under the concept of co-Herrington, 1987, "Pricing Water Services", 80. Cernea 1994, "Environmental and Social Requirements for Resource-Based Regional Development'', 186. Ibid., 186. 82 management whereby the cooperation between the resource users and the government is seen to be the key to efficient resource management. While the regulatory authorities concerning issues such as conservation, data gathering for long-term planning, and regulations of water use are entrusted to the water users at the local level, the government ensures that such decentralization efforts are accompanied by the policies and legislations to acknowledge and legitimize such actions. The above theories, in sum, exemplify the different responses which have been proposed to overcome the problem of market failure. The options are broadly " replace the market; to make it (the market) work better by altering the incentives and costs; or to extend the market by the application of property rights".114 The policy suggestions which accompany these strategies include the introduction of private ownership; the application of the tax system; and the creation of a market for pollution permits. The following chapters examines the prevailing problems of water allocation in the Bangkok Metropolitan Region and the feasibility of water-pricing under the above theoretical frameworks. 114 Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 11. 83 CHAPTER 3;Tff ATTAND; WATER-RELATED ISSUES The global problem of increasing water demand on a supply which is finite and, in addition, deteriorating in terms of quality, are problems widely experienced in many societies. This is especially aggravated by the cycle of water use which makes water an important receptive body of wastes. What this has led to is the allocation conflict of the now scarce water resource, occurring from the competition among various sectors to obtain what they require to maintain their activities. The water issues presently occurring in Thailand are parallel to such problems and are nowhere more prevalent than in the Bangkok Metropolitan Region (BMR). Under the present forces of population growth, community expansion, and economic opportunities within the Bangkok Metropolitan Region (BMR), the surge of water demand by the nonagricultural sector has brought about alarming indications of several water-related problems. These problems reflect mainly the lack of efficient water management and planning practices and thus raise a number of controversial issues. If the prevailing water situation in the BMR is allowed to perpetuate, it is very likely that the benefits of the economic performance by the region will be hampered, unless international sources can be tapped. Even more so, the water problems could lead to a deterioration in the quality of life for the BMR population within the foreseeable future. Since 1990 to the present, Thai water management has been going through a transition period; it is becoming more widely recognized that the venue of sourcing new supply has reached its limitations. Large-scale projects such as reservoir construction are opposed by 84 environmentalists as well as becoming more costly. However, it is believed that this period will still be characterized by the continued efforts to meet the growing water demand. In other words, supply management and the diversion of water from distant sources will still play an important role. On the other hand, demand management was first suggested as a water management alternative for Thailand by the Thailand Development Research Institute's (TDRI) study beginning in 1990.1 However, measures only began in 1993 as a conservation campaign in response to the drought and water crisis of the period. Although this has initiated the awareness of the need for demand management and the proposal from the academic circle to introduce a comprehensive water pricing-system, the efforts in the area is far from being developed. Attempts are still limited to the Metropolitan Waterworks Authority's (MWA) program to inform consumers of conservation alternatives. The use of water-pricing as a measure to encourage conservation is still not accepted by the water utilities as appropriate. At this point, more efforts are being taken toward the regulation of wastewater effects on water sources rather than conservation with the industrial sector as the major target of development. 3.1 Thai Water Management Structure: Agencies Involved: To avoid getting into the complexities of the institutional structure of the Thai water allocation system at this point, the section will be confined to a description of the water management activities of only four agencies: 1) the Royal Irrigation Department (RTD); 2) the 1 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply". 85 Metropolitan Waterworks Authority (MWA); 3) the Provincial Waterworks Authority (PWA); and 4) the Department of Mineral Resources (DMR). A more detailed discussion of the complete set of the numerous agencies involved in water management will be taken up in chapter four where the issues concerning the legal and institutional structure is the focus. The RID assumes the authority to allocate surface water released from two major multi-purpose dams in Northern Thailand through the Chao Phraya River to the irrigation systems which it operates. From the same source of surface water supply, it also allocates a set quota volume to MWA and PWA to provide the services for urban consumption. On the other hand, the DMR has authority over the extraction of groundwater. Legally, groundwater extraction is subject to the licensing provided by the DMR. 3.2 Water Demand Situation in the BMR; The demand for water in the BMR was recorded by the TDRI to have increased at a compound rate of 8 percent per year in the 1980s and is expected to double between 1990 and 2000, then increase four-fold by 2010.2 This dramatic growth in water demand can be attributed to the exceptionally high population and economic growth (most notable in the industrial and service sector), community expansion as well as people's changing lifestyle. Population growth within the BMR results mainly from urban migration. As of 1990, the BMR accommodated a population of between six to eight million. One obvious result of this 2 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 1. 86 incident is the expansion of communities as well as the problem of slums and resettlement which further puts pressure on the water distribution service to meet the populations' basic needs. In terms of economic development, BMR's economic growth in the past ten years is characterized by high levels of industrial production as well as service output. This has led to increasing water demand as well as increasing volumes of wastewater generation. At the same time, the economic boom which translates into income growth for certain groups of the population in the BMR, has influenced the lifestyle of these people by encouraging more water consumptive activities which far exceed the basic need requirement.3 The economic growth and its affect on the BMR's water consumption behavior will be discussed in further detail in chapter five which concerns the BMR's water demand profile. This chapter will limit its focus to the overall water issues in the BMR 3.3 The Problems and Related Issues; Presently, problems concerning water resources in the BMR can be categorized as follows: 3.31 Water shortage Water demand within the BMR has multiplied in various sectors at the same time that overall supply has dwindled due to deforestation of the head waters in Northern Thailand and the wasteful systems of water use in both urban and agricultural sectors. 3 Yoon, 1993, "The Last Drop", 44. 87 The current per capita water consumption level in Bangkok is estimated to be as high as 400-500 litres/day. Under the present trend, the water demand is expected to continue to rise at the rate of 200,000 CMY.4 On the other hand, water supply in the reservoirs continues to show signs of consistent decline. Many attribute the cause of decreased water supply to the widespread deforestation in the north of Thailand where the tributaries of the Chao Phraya river originate. This has been witnessed between 1990-1992 by the below average rainfall in the expected period (between May to November) causing the water level in the reservoir to drop to a critical level.5 While the supply is limited by this phenomenon, the factor which contributes further to the water shortage is the continued inefficient use of water. With the below 30% efficiency rate of the irrigation system, the agricultural sector still accounts for up to 90% of overall water use, free of charge. The significant increase of water demand in the nonagricultural sectors further aggravates the problem. As far as water users are concerned, there is no incentive to use water efficiently. The price charged to the nonagricultural sector has never reflected the full cost of water or its value to society. Meanwhile, the water agency operates a wasteful water-delivery infrastructure with a current rate of 32% unaccounted for water lost through leakage and illegal tapping.6 Since the water agency obtains its raw water supply without any charge, it has no incentive to prevent waste. In sum, water shortage in the BMR is seen to be the result of uneconomical use of water in excess of the dwindled supply. The effect of such uneconomical 4 Yoon, 1993, "The Last Drop", 22. 5 Ibid., 22. 6 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 65. 88 use is most strongly felt during the dry season (November-April) when the level of water supply in the storage dam becomes evidently lower than during normal times. There are two major sources of the BMR's water supply: the Chao Praya river and artesian wells. Currently, the Metropolitan Waterworks Authority (MWA), for its supply service, extracts raw water from the Chao Phraya River at a rate of 35 cubic meters per second (CMS) or 3.02 million cubic meters per day (MCMD). This accounts for 58% of the maximum quota of 60 CMS which the Royal Irrigation Department (RID) agrees to allocate to the Metropolitan Waterworks Authority (MWA), allowing MWA an amount of 5.18 million cubic meters per day (MCMD) of raw water to feed its treatment plants.7 According to MWA's projection, this amount will be sufficient up to 1998. However, MWA has already been experiencing shortage during periods of low water level in the reservoirs since at such times only 30 CMS or 2.59 MCMD of raw water is available. As the demand for water continues to rise, the recorded levels of water in the reservoirs has decreased annually. The Bhumibol and Sirikit dams' water level was record at 10,589 MCM in 1989; it has decreased thereafter to 7,923 MCM, 4,603 MCM, and 4,629 MCM recorded in 1990, 1991 and 1992 respectively.8 With no substantial increase in rainfall, the supply crisis of the reservoirs is expected to increase. It was reported that the combined water level behind the Bhumibol and Sirikit dams measured on July 8, 1992 had dropped to a critical level of 180 MCM.9 Of this amount, 30 MCM was to be distributed for farmers, tap 7 Sethaputra et al., "Water Shortages: Managing Demand to Expand Supply", 57. 8 Yoon, 1993, "The Last Drop", 22. 9 Ibid., 22. 89 water production, and prevention of salt water intrusion. According to observations, the RID was forced to reduce its allocation of water. Salt water thus intruded up to Nonthabun province and as a result the Rama VI mobile treatment plant's operation was paralyzed. Had salt water been allowed to surge as far as Pathum Thani, the most crucial area of water source, the population in Bangkok would have been cut short of water supply totally. While the rapid population growth places great demand on available water, community expansion which seems uncontrollable aggravates the MWA's capacity even further due to their enormous amount of water requirement. Property development in the BMR has been one of the most lucrative businesses in the past 3-4 years. Condominiums, housing projects as well as development of business buildings has increased the pressure on MWA's supply tremendously. The industrial sector has also been under continuous growth and will also eventually require an increased amount of tap water supply as the problem of land subsidence makes it more and more necessary to phase out groundwater extraction. The Issues resulting from Water Shortage The problem of water shortage has raised several important issues as follow: Water use conflict between the agricultural and nonagricultural sector; how should water be redistributed? While the nonagricultural activities involving water use are expanding at exceptionally high rates, the agricultural sector, using water free of charge, continues to account for over 90% 90 of overall water use. Flood irrigation in rice production, recognized as the lowest-value use of water, remains the most common method of agriculture within the central plain. TDRI points out that though a flow of the water resource to higher-value agricultural and nonagricultural users would benefit all parties, the mechanism to allow such a diversion is non-existent.11 Efforts to correct farmers' wasteful use of water in the past was to advise a different method of cultivation. This proved unsuccessful since farmers still believe in the method that had been passed on from generation to generation, where a good yield will result from letting a stream of water flow through the farmland.12 A further proposal was to provide an incentive for farmers not to waste water. That is, charge farmers for the water they use. So far, the Royal Irrigation Department has been reluctant to approve this plan for such a move is criticized as being unfair to farmers who are generally viewed as the most economically vulnerable segment of the population. Under such circumstances, the farmers are seen to be the first target that the government has chosen to strike under their water conservation policy. However, while the institutional decisions and certain public voices seem to indicate that the farmers are at a disadvantage and thus should be exempted from paying for water, field interviews with the farmers reveal quite a different story. The lack of agricultural water pricing system at the national level seem to lead to the presumption that the farmers either cannot or are not willing to pay for water, when in fact TDRT field interviews suggest that fanners in the irrigation command area would be willing to 10 Sethaputra et al., "Water Shortages, 1990, "Water Shortages: Managing Demand to Expand Supply", 5. 11 Ibid., 2. 12 Yoon, 1993, "The Last Drop", 43. 91 pay for water in the case where its availability is guaranteed.13 As the dry-season-agriculture accounts for the largest share of water use, the latest attempt by the government is to encourage farmers to shift from producing the second rice crop, a policy that the government had encouraged 20 years ago, to alternative crops that require less water, i.e. soy beans, sugar cane, maize, peanuts, and legumes. However, the government has not received much cooperation because farmers are reluctant to forego the higher yields and prices they can obtain from the dry-season rice.14 Yet some believe that farmers are reluctant to make the shift because of lack of confidence in new crops. Yoon observes that the meaning of rice farming to a Thai farmer extends far beyond that of just a career. In fact, rice farming is an ancient tradition and to attempt to change a tradition is never easy.15 Changes in rice production would signify changes of the livelihood for Thai farmers. On the other hand, urban dwellers are criticized for being untouched by conservation measures despite their affluent use of water, as a result of their changing lifestyle and requirement for recreational activities such as golf courses and massage parlours. It has been noted that the government's reduction of tap water charges in the outer provinces of the BMR is a measure which benefits large-scale businesses, industries, entertainment places, hotels, and resorts.16 While the BMR's industrial sector's economic performance in the past five years contributes an average share of 72% to the country's gross domestic product (GDP) the 13 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 22-23. 14 Fairclough, 1994, "The Big Dry", 25. 15 Yoon, 1993, "The Last Drop", 43. 16 Ibid., 44. 92 agricultural sector's share has shown constant signs of decrease. TDRI's study suggests that the substantial change in the BMR's economic structure in the past few years, from agriculture to industry and services have shown the new nonagricultural sector to require a relatively small amount of water. Therefore, water savings on the part of the agricultural sector should be a feasible solution to sufficiently meet this new demand. TDRI thus proposes that a water market be created to enable the transfer of irrigation water to the urban and industrial users at a price level that could more than compensate the farmers for any loss of output.17 With this proposal TDRI recommends a policy package with three related components: 1) to increase the price of urban water use with the exception of the first block; 2) to introduce presumptive use rates for industrial water use and increase the price of groundwater to equal the price of pipe water; and 3) to give water rights to farmers, providing them the alternative to either use or sell their quota.18 This is believed to be the solution to improving water-use eflSciency of all sectors, as well as creating an incentive for water conservation without adverse effects on formers as well as low-income urban consumers. The current price structure does not encourage efficient use of water. Under the present price structure, it is evident that water use in the BMR is heavily subsidized. At this point water remains a non-price commodity for farmers; there has yet been no national eflfort to charge farmers for their water usage. Raw water sourced by the water agency either from the Chao Phraya river or artesian wells has always been free of charge. This provides Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 2. Ibid., 82-85. 93 no incentive for the agency to put effort into correcting its wasteful leakage. In addition, water supplied to urban consumers is underpriced. TORI suggests that it would be most appropriate for the government to change its approach to water program funding by emphasizing the importance of generating revenues directly from the beneficiaries rather than depending on general taxation funds. This implies that water conservation through demand management practices must be encouraged by way of appropriate pricing systems whereby consumers must account for the water supply and wastewater disposal services.19 Elasticity demand analysis by TORI indicates that if the effective price is increased at a rate of less than 50%, the demand for water in the BMR would decrease by over 90 MCM. Not only would this reduce pressure on water supply, it would also generate an additional revenue of over 1.1 billion baht. Further estimations suggest that the additional revenue can contribute to supply expansion by well over 120 MCM of water at an average cost of 9 baht per CM.20 Advocates of water pricing, as the mechanism for dealing with water shortage resulting from growing demand, base their argument on the fact that appropriate water pricing can help determine the sectoral allocative optimality by encouraging sensible use of water and waste reduction. Pricing is also seen as the alternative to recover the cost of supply, thereby providing utilities with the funds required for further supply expansion.21 It is obvious that the problems of water shortage will be unresolved and subsidies continue to be required as long as consumers are Sethaputra et al., "Water Shortages: Managing Demand to Expand Supply", 77. 20 Ibid., 34. 21 Ibid., 82. 94 shielded from the actual increasing supply cost of water. On the other hand, water pricing is deemed as a politically sensitive issue whereby the government must be concerned with the adverse effects on low-income consumers. Hence, up to now the government has been reluctant to increase urban water charges. Another factor attributable to the difficulties in water pricing is the institutional structure of the water agencies. Water agencies such as MWA are generally a public enterprise operating under a mandate to provide water for basic needs of the society at the lowest possible cost. The present institutional structure does not allow water agencies the flexibility to adjust water price reflective of its value, as water price structure must be approved by the cabinet, involving a process of several years. The government's focus is on supply management rather than demand management The government's effort to alleviate the problem of water shortage has been focused mainly on seeking new sources of supply. This is reflected in the current direction of most government agencies' policy that advocate reservoir-building or transbasin diversion projects. One of the most recent examples is that of MWA's transbasin project, to divert raw water from the Mae Klong basin. MWA estimates that the cost of transferring raw water in this case will be as high as 0.44 baht per CM. TDRI, however, notes that this estimated cost has yet to incorporate the opportunity cost, the environmental cost, as well as compensation to 95 landowners. It is supported by environmental activists as well as certain economist's view that the cost of such projects as storage dam and transbasin diversion far outweigh their benefits. The government's focus on supply management has been criticized as an alternative which provides consumers with the excuse not to focus on demand management.23 Supply management through building storage dams at this point is seen by some analysts as a distraction of attention from the real problem, which is really how to encourage people to use water more efficiently. The water-pricing policy, instilled since 1914 up to the present, exhibits the lack of demand management as a means for resolving water shortage problems. 3.32 Over-extraction of groundwater which leads to problems of land subsidence and contamination of the aquifer. The heavy use of artesian water in the BMR can be attributed to three important factors: 1) the insufficient water service provided by MWA; 2) the lower private cost of groundwater relative to piped water; 3) the DMR's lack of manpower and measures to effectively prevent illegal groundwater extraction; and 4) the fact that groundwater provides a cleaner source of supply than untreated surface water. As the number of industrial establishments have been increasing at a rapid rate in a more widespread area, water service provided by MWA has not been able to keep up with such expansion. Without available water services, the alternative which the industry must resort to for their operation is groundwater. New development projects, resulting from exceptionally rapid Sethaputra et al., "Water Shortages: Managing Demand to Expand Supply", 58. Fairclough, 1994, "The Big Dry", 26. 96 community expansions, has further made it difficult for the water agency's limited capacity to meet requirements. Most developers in the BMR, thus turn to groundwater sources to solve the problem of water supply for their projects; putting further pressure on the aquifer. There are also cases where industries continue to resort to groundwater even as MWA's service are provided in their area. The reason being that there is a large discrepancy between the price of groundwater and that of pipe water serviced by MWA. While the private cost of groundwater, which includes the groundwater fee of 1 baht per cubic meter, comes to less than 2 baht per cubic meter, the minimum charge of pipe water serviced by MWA for the lower price block of industrial use is 6 baht per cubic meter. As the quality of tap water and groundwater is comparable, it is obvious that there is a large discrepancy in price. The Department of Mineral Resources' (DMR) records show that of the more than 9,000 registered artesian wells in the BMR, over 80% of the total water extracted is for factories and housing estates use. The remaining, less than 20%, is accounted for by MWA as a supplement to its surface raw water supply.24 A study by the Japan International Cooperation Agency (JICA) reveals that groundwater constitutes more than 85 percent of net consumption of industrial water, although BMR's industrial establishments are mostly located within MWA's water supply distribution service area.2S On the other hand, TDRI estimated the use of artesian water by the industrial sector in the BMR in 1990 to be as high as 3 MCMD.26 24 25 Managing Demand to Expand Supply", 51. 26 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 51. Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 51. Japan International Cooperation Agency (JICA) 1989, as quoted by Sethaputra et al., 1990, "Water Shortages: Der 97 Despite the government's effort to reduce artesian extraction to a sustainable rate of 200,000 CMD, heavy exploitation of the artesian still prevails. Not only has the target to control expansion of the artesian extraction rate to 2.3% per year not been met, the use has been conversely increasing at a rate of 5% per year since 1988.27 It is evident that the mitigation measures put forth by the government has not been effectively put to action in as much as the Groundwater Act has not been seriously enforced. Over-extraction of artesian water in the BMR has resulted in critical problems beyond that of land subsidence. An obvious chain reaction are the further effects on artesian quality, the drainage system, building construction, and flooding.28 As reported in a study by TDRI, the social costs are particularly obvious in increased expenses of construction, the shorter life of buildings, materials, and public utilities. It is noted that land subsidence aggravates the flooding situation when it lowers the ground level and as a result constrain the natural drainage system. The damage caused has been reported to be as high as US$240 million in the worst years.29 The Issue of Groundwater Extraction The situation described above raises the following issue: The current price of groundwater does not incorporate the social cost generated by overextraction. On the contrary, the management inefficiencies encourage illegal extraction. According to MWA's information on private groundwater well owners, approximately nine out of every ten owners of groundwater wells are located within MWA's Sethaputra et al, 1990, "Water Shortages: Managing Demand to Expand Supply", 56. Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 19. National Economic and Social Development Board (NESDB), 1993, Unpublished Document. 98 service area and six out of the ten are customers of MWA This partly reflects the price advantage of groundwater compared to tap water. While DMR's record of registered wells already shows a large amount of groundwater being extracted within the BMR, TDRTs calculation of the actual amount of industrial water usage indicates that groundwater consumption must be much higher than that recorded. The discrepancy suggests a high number of illegal wells operating in the BMR and thus the rate of groundwater extraction is much greater than acknowledged by the DMR, the state agency in charge.31 This leads to the possibility that the BMR may be more susceptible to land subsidence as well as artesian contamination than actually realized. A concern that needs to be taken into account when attempting to phase out the use of groundwater is the demand shift to piped water. It is estimated that an additional requirement of no less than 4 MCM of water will need to be accommodated if the current rate of groundwater use is to be replaced by pipe water.32 As MWA already has difficulties meeting the existing demand, an additional requirement shift from groundwater may be beyond MWA's capacity to respond. While the government has been attempting to encourage reduction in groundwater usage, it can be noted that certain measures such as the current industrial water rate contradicts this objective. TDRI points out that under the present price structure, the industrial water rates are progressive up to the level of 2,000 cubic meters per month and are regressive thereafter. It Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 56. 31 Ibid., 51. 32 Ibid., 57. 99 is then a question of whether this price structure indicates an attempt of marginal cost pricing or a designed incentive to induce large industrial groundwater users to shift to MWA service. TDRI suggests that if it is the latter case, where the price structure is intended as an incentive, the expected shift is unlikely to materialize since the MWA rate remains higher than the cost of groundwater. On the other hand, the small- and medium-size industries would continue to use groundwater.33 If the price of pipe water is to be increased for demand management purposes, it would be most essential to set the groundwater fee plus the pumping cost to an equal level of the average pipe water tariff. Logically, increasing the price of piped water irrespective of repricing groundwater would only encourage further groundwater sourcing.34 However, increasing the groundwater price faces problems of management inefficiency. This includes the lack of manpower to monitor the consumption level and to administer the tariff system. The experience of DMR has shown the groundwater fee collection within the BMR to be inefficient and erratic due to insufficient administrative capacity. This has been criticized as one of the major reasons which allows for the extensive illegal groundwater extraction presently in existence within the BMR.35 Therefore, the administrative capacity is another important factor that needs to be taken into consideration if groundwater pricing is to be effectively incorporated into the demand management scheme. Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 67. Ibid., 84. Ibid., 57. 100 3.33 Water Quality Water sources for the BMR has continuously shown signs of deterioration in quality because of the contamination caused by increasing wastes generated in the rapid process of economic development while lacking in treatment facilities. The Issue of Water Quality: Insufficient Measures to correct Negative Externalities Wastewater generated by all sectors in the community and discharged into the common property of society is considered a negative externality whereby the dischargers are not held accountable for their doing but rather, society at large must bear the cost involved in coping with the effect of such wastes. In the BMR, approximately 4 MCMD of wastewater or 0.5 million kg/day of BOD loading is generated then discharged into the Chao Phraya and Tachin rivers by 9 million people, 27,000 factories and a significant amount of livestock and aquaculture activities.36 None of these sources account for the externalities nor does the current water supply pricing system incorporate these externalities into the water price. There are no means by which the wastewater generators are held responsible for the wastewater they discharge into the public water body. Hence, no incentives to treat or even generate less wastewater exist. Discharging wastewater directly into the public water body remains the cheapest and most convenient solution in the short term from the individual's point of view. National Economic and Social Development Board NESDB 1993, Unpublished Record. 101 Between 1987-1989, the water quality of the Chao Phraya and Thachin rivers was reported to be much lower than the standard set by the National Environmental Board (NEB). It is evident that the rapid urbanization and industrial expansion without proper infrastructure to treat wastewater generated by the communities has had an adverse effect on the quality of water bodies in the region. Most water bodies are receptors of wastewater which are generated then discharged directly from households and business entities into storm drains. In the Bangkok Metropolitan Area (BMA) alone, 73.2% of the total BOD load is recorded to be generated by domestic sources.37 Although the industrial sector accounts for 26.8% of the BOD load, it is notorious for the toxicity of its released wastewater. It is reported that 95.5% of the hazardous waste is generated by the industries, and 0.6% by domestic sources.38 Domestic wastewater compounded by the industrial pollution has lead to the severe contamination of the Chao Phraya River, and to a lesser extent, the Thachin River. These two river basins which accommodate most of the country's urban and industrial activities are heavily contaminated by biodegradable pollutants and viruses but to a more serious extent by heavy metals, especially lead, cadmium, and mercury, thus posing substantial threats to public health.39 In general, there is no treatment system for community wastewater. As for industrial wastewater minimal treatment systems exist, if at all. Currently, approximately 55% of the total registered factories are located in the BMR, with 35% in the BMA alone.40 Despite the 37 Mekvichai et al., 1990, as quoted by Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 22. 38 Engineering Science, 1987, as quoted by Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 22. 39 Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 22. 40 Ibid, p. 14 102 government's attempt to decentralize the concentration of industrial activities, the increasing number of factories continues to be located in the BMR. At present, the deterioration in the raw water quality of the Chao Phraya river has caused MWA's treatment costs to increase, thus the profitability of its operations is further reduced. With the intensity of urbanization and economic acceleration, the activities of various sectors: agricultural, residential, and industrial, have contributed to the water pollution problem by different levels of contamination, by discharge of a variety of contaminants resulting from their activities. Since none of these polluters are held accountable for the externalities they impose on society, it is believed that the introduction of economic incentives such as water pricing would change the situation and encourage polluters to control their wastewater at the source. Consumption increases as price of using waterways for waste discharge are kept unreattsticly low Presently, none of the wastewater dischargers, either domestic or industrial, in the BMR are held accountable for their negative impact on the public water body. For this reason the level of water pollution in the BMR is accelerating at an uncontrollable rate. Levy notes from a study on integrated urban water resources management that the demand for water generally increases at a high rate in cases where the price of environmental resources are kept unrealistically low. An example of this is that of municipal wastewater treatment. It is usually a pattern that when the consumption grows, the real cost of treatment also grows. Under the circumstances that treatment is priced based on historical average costs, public subsidy is 103 commonly required because the revenue generated through historical average costs is much lower than the future marginal costs needed to expand treatment.41 It is therefore essential that wastewater treatment be realistically accounted for, otherwise conditions such as those in the BMR will only continue to deteriorate. Without preventive measures pollution clean up will involve high expenses The expenses involved in water pollution clean up prove to be high relative to the cost of water supply. As Levy states " the cost of sewerage service is exponentially greater than that of water service".42 This is further confirmed by the observation that urban water use is mostly not for consumption but rather for other usage which results in the water being returned, in its contaminated form, to the water source. The impact of this is substantial in the cities of developing countries where the cost of wastewater disposal is estimated to be five to six times that of the costs in supplying the water.43 The problem of water pollution clearly imposes great social costs on society as a whole, when it is increasingly expensive to clean up a public water body for the sake of public sanitation and for the purpose of conserving the quality level of the present and future fresh water supply sources. The polluter-pays principle is widely recognized among the government agencies. However, its implementation is yet far from actual practice. Since the principle involves auditing, it has been noted that manpower is still lacking among government agencies while there appears 41 Levy et al., 1993, "Improving the Efficiency of the Bangkok Water System through Demand Side Management and Repricing", 48. 42 Ibid., 48. 43 Ibid., 47. 104 to be very few private agencies interested in taking up the task due to lack of incentive. There is also the question of legitimacy in the case where the private agencies are to perform the auditing. No further step has thus been taken in this direction. In conclusion, all of the above issues are interrelated and linked by the major issue of water-pricing. It is evident that BMR's water resource problems must be dealt with through demand management. However, the important mechanism of demand management, water pricing, has not been politically accepted. The recent two draft laws related to water resources have been criticized for failing to relay any connections between the introduction of pricing incentives with the authority of the government water agencies. Another reason believed to be an obstacle to efficient water demand management, in the BMR, is the present institutional structure where authority concerning water use in the BMR alone is dispersed among no less than six Ministries. The next chapter examines the institutional structure of the present Thai water allocation and management system which have been widely criticized for failing to accommodate to the changes occurring in the pattern of today's water demand. 105 CHAPTER 4; THAILAND'S WATER-RELATED LEGAL AND INSTITUTIONAL STRUCTURE Institutional fallibilities have been claimed as one of the major factors causing the failure of policies such as water-pricing in Thailand. The conditions under which institutional failures occur has been described to be "...faulty management and organization, poor communication, and imperfect information on the part of the state".1 Problems in a water management system are generally magnified because institutional and political problems are related. An institutional framework that is fallible usually does not provide an environment that encourages officials to uphold public interests and therefore the policy decision process becomes more liable to political distortions.2 This chapter outlines the organizational structure of the Thai water management system together with legal aspects of water in Thailand in order to ascertain whether institutional fallibilities are evident. Thai water-related laws will be reviewed together with the proposed changes by the latest drafts of the water codes. In order to lay the ground for further discussions pertaining to the changes within the Thai policy decision making process which will be the determinant of the water-related agencies' future, the last section of this chapter will provide a summary of the historical development of Thai political economy in the context of interest group formation. 1 Sah, 1991 as quoted in Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 5. 2 Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 5. 106 4.1 Administrative structure of the BMR: Thailand's institutional framework is that of a centralized system. The government is the largest public sector, organized into three levels: the central government, the local governments, and the public enterprises. The administrative centralization system established over a century ago during the reign of King RamaV still characterizes the present Thai administrative system without radical modification.3 Like other policies influenced by the centralized nature of the system, the government's control and plans concerning water resources management are administered from offices heavily concentrated within the capital city; Bangkok. 4.2 Government Institutes Related to Water Services: There are currently 30 government agencies that are assigned the responsibilities related to water resources management in Thailand4 (see appendix). Under the Prime Minister's Office are two national committees: the National Water Resources Committee and the National Rural Development Committee. Both committees are theoretically in charge of providing guidelines and co-ordination among all existing thirty water-related agencies. However, the existence of these two national committees, up to the present, has not proved to be of any advantage for co-ordination because there are no set legal obligations for the water agencies to 3 Warr, 1993, "The Thai Economy in Transition". 4 Fairclough, 1994, "The Big Dry". 107 inform each other of their activities. In fact the relationship among these agencies in practice are described to be " hoc, episodic, and often erratic, responding to shifts in the water supply, the emergence of bottlenecks..., and clamoring by interest groups seeking access to water".5 For the BMR alone, the agencies that have the major involvement in setting the direction for water management can be narrowed down to the National Economic and Social Development Board (NESDB), the Royal Irrigation Department (RID), the Metropolitan Waterworks Authority (MWA), the Provincial Waterworks Authority (PWA), and to a certain extent the Electricity Generating Authority of Thailand(EGAT). The National Economic and Social Development Board (NESDB) under the Prime Minister's Office has been responsible since 1961 for putting together the five-year plans to direct Thailand's economic and social policies. The contents of The Plan, however, do not constitute legal enforcement. The Royal Irrigation Department (RID) under the Ministry of Agriculture and Cooperatives is in charge of water rationing to 22 provinces of the Chao Phraya River basin, six of which makes up the BMR The quantity of raw water allocated for BMR's pipe water production thus depends on the quota assigned by the RID. Provision of piped water supply service within the BMR is under the responsibility of two state enterprises: the Metropolitan Waterworks Authority (MWA) and the Provincial Waterworks Authority (PWA) under the Ministry of Interior. While MWA provides water services for consumers throughout Bangkok, Thonburi, Nonthaburi, and Samut Prakan, PWA is 5 Christensen and Boon-long, 1994, "Institutional Water Problems in Thai Water Management: Challenges for New Legislation", 14. 108 responsible for providing water services to the rest of the BMR, namely Nakhon Pathom, Pathum Thani, and Samut Sakhon. MWA's service covers the east as well as the west bank of the Chao Phraya River, an area of 3,080 square kilometers. Population in the area is presently estimated at 7.2 million, one fourth of which has access to MWA's delivery network of approximately 1.1 million connections.6 PWA, on the other hand, was assigned, by a Royal Decree in 1979, the responsibility to supply piped water to all communities outside of MWA's service area of 1.52 million people. Both MWA and PWA are governed by a board of directors chaired by the Minister of Interior. The board is comprised of senior government officials and representatives from the private sector.7 The Electricity Generating Authority (EGAT) has been in charge of large-scale projects of dam construction and managing water for electricity generating purposes. Water allocation up to the present has been the responsibility of the Royal Irrigation Department (RID). Without any defined property rights to water, all agencies compete for claims of the water volume they require to operate. The major competition usually occurs among the RID, EGAT, and MWA, all of whom are raw water users at zero cost. Such competition has resulted in the reduction of irrigation water allocated to the agricultural sector. As at present, the water volume allocated to the agricultural sector's irrigation is determined only after all other agencies have submitted their claims.8 6 Thai DCI et al,1990, "Master Plan for Water Supply and Distributionof Metropolitan Bangkok: Report on Feasibility Study of Raw Water". 7 MWA, 1994, Interview. 8 Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for Legislation", 14. 109 4.3 Planning and Measures Taken; The modern system of water supply as currently in operation was first introduced to Thailand during the period of King RamaV (1868 to 1910). Since then planning concerning water allocation in the BMR by MWA and PWA has revolved mainly around the master plan of how to manage the raw water they obtain from the RID. A review of the literature indicates that there has not been any integrative planning for water allocation in the BMR. Each agency involved in providing water services has its own plans and mandate to adhere to. Water has always been considered an abundant resource hence a non-price commodity. Therefore, the purpose of water resource planning appears to be in support of other activities rather than for the sake of its own value. 4.31 Water Resource Planning in Thailand; The following summarizes examples of water resource planning in Thailand: Since the first National Economic and Social Development Plan (1962-1966) which featured the promotion of agricultural production for export as its theme, the government entrusted the RID to develop and expand the agricultural production area in the central plains of the lower Chao Phraya basin. Farmers were further encouraged to cultivate second rice crops for the farming year. To support this policy, the Bhumibol Dam, considered as the largest multipurpose dam in Thailand, was constructed on the Ping River, a tributary of the Chao Phraya River, in Tak province. Later the Sirikit dam was constructed on another tributary, the Nan 110 River, in Uttaradit province. Thereafter, the RID has assumed the role of allocating raw water from the two dams to feed the consumption needs of 22 provinces. Judging from the budget allocated for water resources development relative to other government activities during the first four National Development Plans, attention given to water resources between 1961-1981 was minimal in terms of environmental management. A study on environmental impact studies in Thailand9 shows that the provision of water supply service was given highest priority since the second National Economic and Social Development Plan (1967-1971). Groundwater development and water resources conservation was next in priority but was not recognized until the later third (1972-1976) and fourth (1977-1981) National Economic and Social Development Plans (see appendix). It was not until 1975 that the government expressly stated its recognition of environmental issues through the establishment of the National Environment Board (NEB). The Office of the Secretary of the Board was to report to the Prime Minister's Office. Later in 1979, it was transferred to the Ministry of Science, Technology and Energy. Under the National Environmental Quality Act of 1975, the NEB's role and responsibility mainly involves planning and reporting to the Cabinet issues concerning the environment. Just as the NESDB, the NEB plans do not signify legal enforcement. Following the land subsidence problem during the period between 1978-1981 resulting from heavy groundwater usage in the BMR, the government entrusted two agencies, the MWA and the DMR to carry out six measures approved to solve the problem (see 9 Sujarittanonta, 1983, "Environmental Impact Study in Thailand". I l l appendix). However, none of the mitigation measures were effectively enforced. Meanwhile, MWA also conducts its own studies to find ways of increasing its source of water supply. The most recent plan which is in the process of implementation is the raw water diversion scheme from the Mae Klong River for an additional supply of 30, 30, and 45 CMS in the year 1998, 2000, and 2007 respectively.10 Generally MWA's planning largely involves expansion of water-delivery infrastructure to serve a larger community area. But the recent reduction in water availability of the Chao Phraya river has forced MWA to search for additional raw water sources to supplement the allocation from the RID. In the Sixth National Development Plan (1987-1991) it became clearly recognized that the degradation of natural resource and environment could pose serious threats to growth because the marginal costs of land and water as productive input was constantly on the rise. Therefore, it was concluded that the past government's determination and capability had not been adequate to cope with resource and environmental problems.11 It was not until 1990 that the first research concerning environmental problems was carried out by TDRI. Drawing from the experiences of developed countries, the research result led to TDRI's proposal that Thailand adopt market-based mechanisms to control pollution.12 These ideas later made their way to the environmental legislation of 1991 during the office of Prime Minister Anand. The 1991 environmental legislation is believed to offer feasible alternatives to the traditional system which relied heavily on administrative regulations. 10 Thai DCI et al., 1990, "Master Plan for Water Supply and Distribution of Metropolitan Bangkok: Report on Feasibility Study of Raw Water". 11 Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 234. 12 Ibid., 235. 112 The Seventh National Development Plan (1992-1996) incorporates several environmental initiatives formulated by the government led by Prime Minister Anand (see appendix). It is under this plan that the Polluter-Pays principle was endorsed for the first time. The most impressive breakthrough has been noted to be the enactment of the Enhancement and Conservation of National Environmental Quality Act B.E. 2535 (1992).13 The issuance of the Act has established a point-source standard for water quality and allows monitoring agencies to take action against polluters. At the same time, NGOs and individuals are provided the option of taking legal action against polluters. On the part of the enterprises, those who are dischargers of wastes are required to either pay for the service of central treatment facilities or set up private treatment facilities. In this respect, the government provides low interest loans for set ups of treatment facilities and reduction of import duties on equipment designated for treatment facilities. 4.32 Water Law: Property rights over water resources have never been clearly identified in any Thai laws. The constitution of 1991 only indicates that it is the responsibility of the State to upkeep the environment and the natural resources balance, to prevent and clean up pollution, and to conduct planning for appropriate land and water use. However, Civil Law, to a certain extent, implies that water resources is "public property".14 For water supply allocation three legislations are concerned: the Private Irrigation Act of 1939, the State Irrigation Act of 1942, and the 13 Kaosa-ard and Kositrat, 1993, "Economic Instruments for Water Resource Management in Thailand". 14 Wongbundit, 1992a, "Revisions of Thai Legislation Concerning Water Resources", 3. 113 Dykes and Ditches Act of 1962. The State Irrigation Act of 1942 is especially intended for the control of the use of the irrigation system. By authorizing the RID to construct, manage, and monitor the state irrigation system, it provides the RID with the right to the collection of fees from water users.15 In terms of charges, the 1974 Agricultural Land Consolidation Act also provides the authority for water agencies to charges for water consumption.16 But the enforcement of the laws has often not been attempted since the waiving or deference of charges is generally a form of subsidy that the government provides to the farmers. Therefore, charges in practice are known to depend on the farmer's capacity or willingness to pay.17 In terms of water quality control, no legislation prescribing the punishment for discharging wastes into public water bodies exists. The only responsibility of the environmental agencies is to monitor ambient levels of the water streams. Since the 1992 Environmental Act came into existence, several adjustments are expected to provide a more promising future for water quality control in Thailand. According to the 1992 Environmental Act, the environmental problems are to be integratively managed through short and long-term plans formulated by an inter-disciplinary ministerial committee. Also of importance is the intent to decentralize the authority concerning environmental management to the provincial authorities and thereby recognize and encourage 15 Kaosa-ard and Kositrat, 1993, "Economic Instruments for Water Resource Management in Thailand", 7-8. 16 Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for New Legislation", 14. "The State irrigation Act of 1942 and its subsequent amendments allow the RID to impose a charge of up to O.SO Baht ($0.02) per cubic meters for irrigators, and the same charge per cubic meters of water for all other users...the Dykes and Ditches Act of 1962 and the 1974 Agricultural Land Consolidation Act authorize the RID to impose charges on landowners and other irrigators for Operations and Maintenanace (O&M) and the capital costs of land improvements". 17 Ibid., 14. 114 the involvement of NGOs and resource users in the process of management. To provide support for investments in pollution control and the practice of the Polluter-Pays principle, an Environmental Fund of US$200 million has also been established. 4.33 Water pricing system in Thailand; Water price in Thailand currently applies to only consumption metered by MWA and PWA and groundwater extraction authorized by the DMR. This generally includes only residential consumption, service industry consumption, and to a much lesser extent manufacturing industry consumption. The water pricing system in the BMR has been in effect since 1914.18 Since then the structure has undergone some major changes (see appendix). Currently, water price charged to customers by MWA can be described as being a progressive rate, classifying customers into four types: 1) domestic; 2) business and government enterprises; 3) government agencies; and 4) industry.19 The price structure charged by PWA is also that of a progressive rate but applies equally to customers irrespective of type (see appendix). On average, the PWA's cabinet-approved price is higher than that of MWA's. It is likely that the MWA will continue to further invest in the expansion of its water supply services within the BMR. However, its rate of return on such investments will be the key determinant of whether the expansion can sufficiently meet the demand. Under the present 18 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 29. 19 Metropolitan Waterworks Authority, 1993, Annual Report. 115 situation of water supply shortage coupled with the pricing structure which is based on the policy of cost recovery, MWA has not been able to sufficiently accommodate the water demand of the area under its service responsibility.20 The water pricing structure of both MWA and PWA is controlled by the government's ministerial Cabinet. Any adjustment in water price is subject to the agency's board review as well as the Cabinet's approval, a process which not only features several levels of scrutiny but also takes many years. Through meter connections, the Metropolitan Waterworks Authority (MWA) is responsible for enforcing a charge on water use within three provinces of the BMR: Bangkok, Nonthaburi, and Samut Prakan, and the Provincial Waterworks Authority (PWA) for the other provinces. Both MWA and PWA are public enterprises established by a Royal Decree under the Public Enterprise Establishment Act (1953). 4.4 Obstacles to Implementation: Literature reviews on why water demand management through pricing have not been adopted in Thailand indicate two main reasons: 1) the government's concern for the adverse effect on farmers and low-income urban consumers, and 2) the institutional structure's inhospitable features do not allow for an effective introduction of a price system. It is believed that an increase in water price will place a burden on two groups in the society: the farmers and the low-income urban consumers. Charges for irrigation water have never been introduced or attempted because it is believed that agriculture represents the lowest-value use of water and Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply",56. 116 therefore would lose out in times when competition for water is high such as during the dry season.21 Another reason believed to make the government reluctant to raise water prices is that the low-income urban consumers would be adversely affected. As such the water service system has always been based on a general subsidization philosophy. In terms of institutional problems, although it is evident that water demand management calls for improved coordination among government agencies (the RID, the MWA, the PWA, the EGAT, and the NEB), the institutional structure does not encourage such action. In terms of efficiency, the individual agency has demonstrated effective managerial capacity to accomplish their assigned duties. But upon the national level of interest where co-ordination among agencies is required, the lack of flexibility becomes apparent. Being risk-averse, each agency makes it their priority to adhere to their mandates, overlooking the need for balanced benefits and overall achievement.22 These mandates usually came at the time of the founding of the agency, often during times of different circumstances. The lack of appropriate channels for co-ordination among agencies is reflected in Yoon's observation that "The measures being proposed by the authorities and environmentalists to relieve the water shortage range from the highly controversial construction of more reservoirs to reforestation and economical water consumption. The RID, for example prefers large-scale projects since the big reservoirs are more efficient in terms of water storage. The Ministry of Interior, on the other hand, has proposed a 88 billion baht fund to develop small projects nationwide. There are also proposals to divert water resources from neighbouring countries, 21 Sethaputra et al., "Water Shortages: Managing Demand to Expand Supply", 82. 22 Ibid., 78. 117 draft new laws and educate farmers, who are claimed to be the biggest users of water, about replacing rice with alternative crops".23 The inconsistencies within the public bureaucracy is seen to be a major obstacle to the effectiveness of introducing a water-price system.24 4.5 Future Trends and Opportunities; There is presently more awareness concerning environmental problems in both the government and non-government sectors. Several protection as well as prevention measures have been launched. Mekvichai notes that environmental protection efforts can be divided into 1) revision of laws and regulations; 2) reorganization of responsible organizations; and 3) introduction of enforcement instruments.25 4.51 Reorganization of Responsible Organizations and Introduction of Enforcement Instruments; Currently, the NEB has been restructured to have more authority for implementation and enforcement of the revised 1992 Environmental Act. Both regulatory and economic instruments have been introduced. Mekvichai identified examples of these instruments as the Environmental Protection and Improvement Fund of 500 million baht, the incentive provisions in the form of tax allowances, and the allocation of 400 million baht for projects to alleviate water ° Yoon, 1993, "The Last Drop", 56. 24 Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for New Legislation", 14. Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 37-38. 118 pollution problems (see appendix). It is also noted that there is increasing responsibility on the part of the local governments and non government organizations in the BMR. These entities are becoming more aware of the need to encourage the participation from the private sector in the task of financing, monitoring, and providing information concerning water management programs.26 The approach gaining most attention at this point is the economic instrument which emphasizes the User-Pays or Polluter-Pays Principles. A Fourth Bangkok Development Plan (1992-1996) has been put forth by the BMA government. Three of the plan's environmental development policies are related to water issues (see appendix). 4.52 Revisions of Laws and Regulations in Support of the Reorganization of Related Organizations and the Introduction of Enforcement Measures; An important project that the government has most recently launched is integrative watershed management, whereby water resources will be subject to a more holistic planning process. The establishment of a water ministry has also been proposed. These perceptions are reflected in two draft Water Codes, one produced by the National Research Council (NRC) and one by the Law faculty of Thammasat University. Both drafts are currently being reviewed by the Prime Minister's Office and there has been mention that a merge of the two drafts into one legislation is being considered.27 Proposals put forth by the two drafts partly include the Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 39. 27 Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for New Legislation", 23. 119 establishment of new administrative authorities and the introduction of certain policy instruments. The NRC draft proposes that a National Water Resources Committee be established to take charge of drafting a water plan which would determine the national allocation priorities according to the obligations within the framework of the five-year national development plans. This committee is also empowered to impose national allocation priorities on the other government agencies. Meanwhile, Basin Committees would be set up to oversee the water allocations of the 25 major river basins and to report the water situation within each of its river basin to the National Water Resources Committee. The Basin Committees are also to be authorized to declare a water shortage zone during times of water crisis. The key constraints of water management in Thailand are perceived by the NRC draft to be the excessive number of government agencies with overlapping legal mandates in the matter of water resources. The Thammasat draft, on the other hand, proposes that Basin Committees be established but with wider mandates than the NRC's Basin Committees in that they would be in charge of planning for the development and management of the water resources within each of their own river basins. The similarities of the two drafts lie in that both drafts see the Basin Committees or Commissions as the co-ordinator of decisions among the various government agencies and represent the input from user groups on the best alternative to manage and allocate water. Both drafts also propose the creation of a national Water Ministry which would be empowered to manage and implement the policies proposed by the basin authorities. Each draft also suggests 120 that the representatives seated on the Committees or Commissions include officials from key water agencies, academics, and various user groups such as industry and agriculture. However, neither draft has determined how the representatives would be selected. In terms of policy instruments, both drafts suggests the introduction of a permit system whereby water users must purchase a permit from the government. The NRC draft emphasizes that enterprises must always obtain a permit for their consumption while other users would only need to obtain a permit from their Basin Committees in times of crisis. On the other hand, the Thammasat draft requires that all water users except residential consumers must obtain a permit at all times for their consumption. The Thammasat draft also proposes that permits for wastewater discharges be introduced. While the NRC draft implies that consumers are not specified as to the volume of consumption and water charges will only apply when permits are issued during crisis, the Thammasat draft does specify the consumption volume the consumers are entitled through its permit issuance but does not specify how the charges are to be determined. A debate that has not been settled but shows positive indications of progressive perceptions, in terms of institutional structure, is that governors be elected rather than appointed by the central government. It is believed that this will open channels for the public's involvement in managing their local environmental conditions. Most important would be the right to retain and manage their financial resources and therefore enable more efficient investments in environmental management. Another interesting move is that a bill proposing the creation of a Water Ministry has been submitted to parliament. 121 On the more specific issue of water pricing, TDRI suggests that one way to avoid problems occurring from hardship created by price increases is to be selective in raising prices by "increasing the price of pipe water produced by both the MWA and the PWA to reflect the marginal cost of supply, except for the first block, which could be frozen (in real terms) at the current minimal rate to cushion the effect of the price rise on low-income users... in line with the marginal costs of supply; the government cabinet need only maintain control over the lowest block rate to protect poor consumers and very small businesses".28 In the long run, whether MWA's role is to include the management of water usage will depend on how much it is provided with the authority and flexibility of setting water rates. On the other hand, Cristensen has suggested the alternative of phasing in the use of pricing by sub-sector and to begin with differential pricing for different clientele.29 4.6 Neglected Perspectives on the Issue of Water-Pricing; While the concept of water pricing has received attention and has been accepted among economists and academic circles in Thailand in recent years as an economic policy instrument that could allow more efficient management of water demand, existing measures and perception in water management in Thailand, at large, still reflect the dominance of supply management. Based on the prevailing structure and situation of water resources management in Thailand, it is proposed that the difference in these perceptions represents 28 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 82-83. 29 Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for New Legislation", 36. 122 the different standpoints that each interest group takes in evaluating their benefits and losses expected to occur from changes in water allocation schemes. In this case, the change would be for water allocation to be determined by price. While the government through its bureaucracy assumes the role of the allocator, it has been criticized for its political fallibilities and inhospitable institutional structure for establishing such an economic policy instrument.30 Instead of focusing on the analysis of the government's failure in the course of its water resource management, it is here proposed that the feasibility of water-pricing in the BMR depends not only on the allocator but also on the various roles interest groups have toward perceived benefits or losses. Each group, according to its capacity, is likely to exercise its power to influence the decision-making process in order to shape the outcome to the best of its benefit possible. The pattern of interactions among these interest groups and the degree of power they are likely to have can be at least, in part, explained by the political culture and environment under which they function. This being stated, it is important to proceed with the analysis of the interest groups relevant to the issue of water pricing and its historical development within the Thai political system. 30 Christensen, 1994a, "The Governance of Water Allocation Problems in Thailand", 5. Oiristensen excerts that "institutional and political problems are related in that a highly fallible institutional framework can discourage officials from acting in the public interest and thereby increase the likelihood that political distortions will pervade decision-making". 123 4.7 Thailand: Political Economy and the Development of Interest Groups The following is not intended to be a detailed account of Thai history but rather to highlight some important historical developments which continue to have influence on the present characteristics of Thai society in terms of the interrelations among interest groups, the status each interest group holds within the Thai political system and the degree of political influence they are likely to have on the policy decision-making process. While water allocation is believed to be a political issue, the root of the problems involved in water allocation conflict in Thailand, has been identified as the prevailing regime of property rights to water. Water allocation regime in Thailand has historically and traditionally been one of open access with once the monarch and eventually, the state presuming the authority of the allocator. 4.71 Siam and the Sakdina System; Water resources in Thailand, as other resources, was once the property of the monarch. During the times when Thailand was known as Siam31, a kingdom of absolute monarchy, the major part of the kingdom's resources was controlled by the monarch who was also the provider of the necessities to all its citizens, water being one of the prime resources. The kingdom's land abundance and labor scarcity justified the founding of an 31 Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 39. The name Siam was changed to Thailand in 1939 during the rule of a military prime minister, Phibun, who tried to build up a leadership cult around his person. The reason for the change is believed to be his intention to "...emphasize the ethnic basis of his concept of the nation state". 124 elaborate system of administration known as the sakdina system which arranged the society into a finely delineated hierarchy.32 The system, where every person within the kingdom was assigned a rank, allowed the monarch to place the population under the patronage of his officials accordingly and thus establish the hierarchies of patrons and clients, a pattern which characterized the distribution of political power, economic status, and evidently the relationships between individuals of different classes. Resource allocation was determined by the hierarchy of the system, and naturally with the monarch as the prime provider. The monarchy's absolute control was legitimized by two historical traditions: Buddhist and Hindu. These two separate traditions are well summarized by Muscat.33 Under the Buddhist tradition, the monarch's right to rulership is derived and sustained by way of moral authority whereby according to Buddhist principles, the monarch renders justice towards his subjects. On the part of the subjects, it is their moral obligation to recognize the monarch's merits and return their loyalty. The Hindu tradition, on the other hand, justifies the monarch's rulership by the concept of a god-king and hierarchical social system. The combination of these two traditions have provided Siam with a unique Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 20. The sakdina system was designed based on the combination of both the Thai and Indianized Khmer early traditions. From this the Siamese monarchs are said to have developed "...a system of manpower control mat integrated major cultural and material dimensions of the society-the distribution of power, the class structure, the military mobilization system, economic relationships, civil administration, religious sanction, and interpersonal relationships and etiquette". The hierarchy of the sakdina system consisted of four classes: princes of the royal blood, nobility, commoners, and slaves. Mascat explains that "Control of freemen and slaves by lower nobility (who doubled as military commanders and/or civil administrators), and of lower nobility by individual patrons of higher sakdina, set the pattern, at any time, of the distribution of political power and economic status. Within specified limits, nobility and royal patrons controlled labor time, produce, or funds of their clients, the lesser nobility, freemen and slaves...The individual freeman lost control over half his own labor time through the requirement that he provide his patron up to six months of corvee labor each year". 33 Ibid., 20. 125 relationship between the monarch and his people. While the monarch is highly respected and represents divinity, he is also looked upon as the provider for all his people's needs. As for the relationship between classes, the concept of patron-client relationship has long been used to describe Thai society and to explain the perception which underlies an individual Thai's course of action within society in terms of class interrelations. An important trait of such pattern of relationships is the strong voluntary interdependence between the patron and the client. An interesting example appears in the case of slavery34 (the term that in Thai). The institution of slavery in Siam arose from individual patron-client relationship, described as "the right of free men to sell themselves into bondage".35 In other words, a freeman could voluntarily bring himself into slavery in exchange for security, since with this status he would be provided with food, clothing, and shelter without the increase in his original debt. It has been suggested that the security and protection provided is the major attraction for people to come into bondage and thus the status of slavery. 4.72 The Period of European Colonial Expansion; The regime of open access to water was sustainable under the sakdina system, since the kingdom was underpopulated, production was organized by the hierarchy of the 34 Akin, 1969, as cited in Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 21. The term slavery does not truly explain the term that as explained by Muscat's citation from Akin's view that "The necessity to use the word slave for that is unfortunate. The idea associated with the word slave in the Western world are quite different from the ideas associated with the word that". Muscat further notes from Akin's study that "...there was no slave market in Thailand; masters had no power of life and death and could be severely punished for physical maltreatment of their that". Ingram, 1955, as cited in Muscat 1994, "The Fifth Tiger: A Study of Thai Development Policy", 21. 126 system for a largely subsistent economy and citizens under this delineated system held shared traditional values in their water use as any other resources.36 This formal hierarchical system, however, did not survive the pressure of European colonial expansion. During the reign of King Mongkut (RamaTV: 1851-1868) and King Chulalongkorn (RamaV: 1868-1910), Siam underwent a period of change. In order to avoid losing its independence to European colonialism, King Mongkut recognized that it was necessary to reform the kingdom's fundamental political and economic structures.37 After a long period of closure to the Western nations, it was King Mongkut who opened Siam to foreign trade, dating from 1855, the year which he concluded a treaty to establish commercial relations with Great Britain, known as the Bowring Treaty. This marked the beginning of Thailand's modern history. The Bowring Treaty and Thai Modern History: The Bowring treaty had set a pattern for similar treaties Siam eventually came to conclude with other Western nations.38 Over the period of King Chulalongkom's reign, Thai tradition and culture are strongly tied to water. Several traditional ceremonies or celebrations involve the use of water, indicating the influence of Hinduism. Water signifies purity and joy. Rivers and waterways are believed to represent the goddess refered to as "Chao Mae Kong-ka". In the Northern part of Thailand, several traditional water allocation systems still prevail, known as the system of "Muang Fai". 37 Musacat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 12. Muscat noted that "During Mongkut's seventeen years of rule and his son Chulalongkom's lengthy forty-two year rule, from the mid-eighteenth century until shortly before the First World War, Siamese statecraft faced three principal issues: maintenance of independence, internal political consolidation, and development of economic and administrative strength. These three essential objectives were interrelated...By the time of King Chulalongkom's death in 1910, these three broad objectives can be said to have been met. Based on a policy of close association with and accommodation to Great Britain, Siam's independence had been maintained in an era when large areas of Asia and Africa were falling under colonial rule". 38 Ibid., 13. The Bowring treaty and later similar treaties with other Western nations resulted in the monarch's grants of extraterritorial rights of legal treatment to respective foreign nationals. Rules of foreign trade and inland 127 reformation continued through the initiation of the monarch, this time with an attempt to bring about a thorough reformation of the Thai way of life. Such a process of modernization has been described as "a revolution from the throne".39 The reformation was marked by the successful task of state consolidation40 whereby a powerful bureaucracy was created for the purpose of central administration. Also of importance was the manpower reforms through the abolishment of corvee and slavery,41 one of the reasons being quoted was the need to shift from the exchange system based on labor and produce in kind to a monetary labor market. This resulted in an economy of free farmers and money wages. When coupled with land abundance42 and the central policy43 the objective of the government at that time was to encourage the expansion of rice production and significant rice output was witnessed. commerce was fixed in a manner which constrained Siam from an independent fiscal or trade policy. State trading and most government private monopolies were abolished, all of which established a regime of free-trade whereby infant-industry protectionism was not allowed. 39 Sternstein, 1982, "Portrait of Bangkok", 20. 40 Muscat, 1994, "The Fifth Tiger: A Study on Thai Development Policy", 12-13. Because previously, the outlying regions were loosely governed, they were seen to be susceptible to the territorial encroachment by France on the east from Indochina and by Great Britain on the west and south from Burma and Malaysia. This called for the consolidation of central control. 1 Ibid., 22. Slavery was gradually phased out through a series of decrees put forth by King Chulalongkorn from 1874 until the final abolishment in 1905. Ibid., 23-24. The Thai situation of land settlement is noted to be quite different to those of Latin America, the Indian subcontinent, or the Philippines. In the Thai case, the bulk of peasants is described by Muscat to be " a long tradition, could settle and farm as much land as a farmer could cultivate...Legislation in 1908 codified the right of the people to settle as much land as they could 'turn to profit'. The Land Act of 1936 reaffirmed free settlement rights but put a limt of 50 rai on the amount of land that could be claimed. In the nineteenth century land-tax incentives were introduced to encourage people to clear and cultivate new land". Ibid.,23. The policy objective of the government was reflected in the incentives tied to land taxation and measures involving land clearing and paddy cultivation. 128 The Establishments of Business Associations: Amidst the increase in foreign trade, the extensive expansion of rice production had provided the surplus for export and thus converted the purpose of rice growing from life sustenance to commercial export. Meanwhile, the shortage of manpower outside of agriculture, for the construction of infrastructure such as railways and irrigation systems was filled by large-scale immigration of Chinese labor. Because of government policy that excluded Chinese from slavery or corvee combined with the Thais' preference of agriculture over any other occupation, commercial and entrepreneurial activities were eventually left to these Chinese immigrants and other foreigners.44 Records of business associations in Thailand, well documented by Laothamatas, indicate that the first business association was organized by Western traders in 1898, and in 1908, the first local business association organized by Chinese immigrants came into existence. But there was no record of organized business association by ethnic Thais. Since the Western business associations, under the extra-territorial rights, were registered with, and reported directly to their government, they were of little concern to Siamese authorities. On the other hand, the Chinese business associations were often suspected to be related to the political activities against the imperial government in China and thus were seen as a threat to the Thai monarchy. In response to this concern, the Association Act45 was put forth in 1914. By 1917, ethnic Chinese became the core of Siam's business and labor classes, and accounted 44 Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 25. Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 21. Thel914 Association Act empowered the government to "...disapprove the registration or order the dissolution of any association deemed to endanger public peace and order". 129 for approximately 10 percent of Siam's total population.46 Although the ethnic Chinese were smoothly assimilated into the Thai society47 in these earlier years of the nineteenth century, the last two decades of the absolute monarchy period saw a range of factors48 which were unfavorable to this assimilation. Under the concept of nation-state and the spirit of nationalism advocated by the ruling elite, the Chinese were portrayed as "...excessively money-oriented, devoid of civic and moral virtues, and draining off Thai wealth in the form of remittances to their homeland".49 This anti-Chinese sentiment was clearly reflected in King Rama VTs writing which refered to the Chinese as "the Jews of the Orient". 4.73 End of Absolute Monarchy Beginning of Bureaucratic Polity; By the mid-nineteenth century, the sakdina system had reached a point of deterioration. But despite the decline of the formal hierarchy and the extensive reformation Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism'', 23. Skinner, 1957, as cited in Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 24. Three socio-political factors were believed to underly the remarkable absorption of ethnic Chinese into Thai society: 1) Theravada Buddhism, which the Siamese were committed to, is no obstacle to the social integration with the Chinese who are familiar with Mahayanna Buddhism; 2) Chinese females rarely emigrated to Siam, so the Chinese male immigrants either married Thai or Sino-Thai females; 3) Having avoided Western colonialism the ruling elite of Siam has always been Siamese and thus the Chinese had an incentive to integrate with native people if they were to advance their interests. Laothamatas, 1992. "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism'', 24. Lothamatas observes that the factors which retarded the assimmilation of ethnic Chinese into Thai society during the last two decades of absolute monarchy were: 1) the large average annual surplus of immigrants; 2) the immigration surplus had a higher proportion of female Chinese as a greater number of immigrants no longer came without their wives; 3) the rising Chinese nationalism as a result of the internal events within China. In turn, the Thai elite, under the spirit of nationalism patterned on the Western concept of nation-state, became concerned about the loyalty of the increasing ethnic Chinese population and their domination of the economy. 130 of the Siamese political and economic structure, the patron-client pattern of relationships remained rooted in Thai society, as Muscat observes "Although the formal hierarchical system disappeared (except for residual titles among royal descendants), the predilection to hierarchy and to a social system in which people group themselves in patron-client networks had become deeply embedded in Thai society, the subject of extensive analysis by historians and by students of contemporary Thai bureaucratic and political behavior".50 The patron-client relationship remains to be the element in much of the relations within Thai society.51 In the years following the death of King Chulalongkorn (1910), Siam experienced a severe drought and the effect of world economic depression. Neither King Vajiravudh (RamaVI) nor King Prajadhipok (RamaVII) were able to uphold the confidence and authority previously provided by King Chulalongkorn. Intellectual civilian and military bureaucrats with European education were discontented with the prevailing system of governance. Therefore, in 1932, they staged a coup52 developed in secrecy over a period of seven years, thus ending the absolute monarchy without violence. As the pattern of 50 Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 23. 51 Akin, 1969, as cited in Muscat 1994, "The Fifth Tiger: A Study of Thai Development", 22. Akin notes that "Thai society is permeated with client and patron relationships...In general, the relationships...were interdependent. Further, it was the role of the patron to protect and help his client...The best security for a loan to a man was to have the debto or his child or his wife living in and serving in the creditor's household. There services could be taken for the interest". Riggs, 1966, "Thailand: The Modemizationof a Bureaucratic Polity", 149. This coup is usually refered to in Thai as a revolution. Riggs recorded that "The revolution did not emerge , as constitutional movements did in most Western countries, from a revolt of the middle classes, of industrial workers, of mass-based political parties, or of other widely supported organizations outside the government. Rather, the leaders of the revolution were themselves members-actual, would-be or recently laid off-of military and civil bureaucracy". Muscat, 1994,"The Fifth Tiger: A Study of Thai Development Policy", 29, also noted that this so-called revolution does not resemble any charateristics of the classic revolutions of European or Latin American history which Muscat outlines as ".. .prior years of widespread unrest, the mobilization of mass popular support, overthrow of the ancien regime by violence, or a subsequent descent into reaction". 131 governance transformed into the system of constitutional monarchy, the role of the provider was shifted to the state. Although the new regime broke the absolute authority of the monarch, allowing a larger group of people access to the political arena and more participation in the process of decision-making, the power was largely passed to members of the bureaucracy, military and civilian.53 Most prominent was the rule of military governments or civilian governments by military approval, clearly described by Laothamatas as "...military bureaucratic elite which has risen to power through successful coups or the support of the politicized army".54 Because of the bureaucratic dominance, Thailand's political and policy-making process has been identified by several authors55 under the concept of bureaucratic polity. Interest groups considered as one of the underlying substructures in such model or part of what is also refered to as extra-bureaucratic forces were seen to remain politically weak, despite their growth in numbers. The reasons for this are identified by Riggs as being the weakness of Thai associations in terms of finance, membership, internal cohesiveness, direction, and drive.56 As a result, they were subject to government manipulation. Riggs, 1966, "Thailand: The Modernization of a Bureaucratic Polity", 148. Riggs noted the change in institutions of political control following the 1932 revolution to be largely formalistic. He described that "They (The new institutions of political control) presented an imposing facade of official constitutionalism, but behind this front, real power passed largely to members of the bureaucracy, both military and civilian". Loathamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 2. 55 Wilson, 1962, "Politics in Thailand". Siffin, 1966, "The Thai Bureaucracy: Institutional Change and Development". Riggs, 1966, "Thailand: The Modernization of a Bureaucratic Polity". Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", notes that Riggs was first to explicitly formulate the concept. 56 Riggs, 1966, "Thailand: The Modernization of a Bureaucratic Polity", 150. 132 Interest Groups Under the Bureaucratic Polity: When compared to the relative affluence of the government, the local associations were financially ill-equipped since the majority of private funds were of foreign nationals. This made local associations dependent on the government's support and subject to bureaucratic control. In terms of membership, the associations were predominated by bureaucrats and thus their capacity to assert independent pressure on the government was significantly weakened. Riggs also attributes the weakness of interest groups to the Thai social structure and beliefs, particularism and eclecticism, which although did not fundamentally pose an obstacle to the organization of associations, did inhibit their effectiveness.57 In fact, Girling sees the bureaucratic-business relations during this period as being founded on the patron-client concept: "The development of bureaucratic-business cooperation along clique lines, that is according to traditional patron-client practices was not a result of institutional or functional collaboration, which is usually considered to be part of the process of modernization. Cooperation between wealthy Chinese 'syndicates' and powerful Thai military officers and leading civilian merely a contemporary equivalent of the "informal" patron-client relationship between Thai kings and Chinese tax farmers more than a century before and between government officials and Chinese traders since then".58 From this point, the bureaucratic polity model is clearly 57 Riggs, 1966, "Thailand: The Modernization of a Bureaucratic Polity", ISO. In attributing the weakness of interest groups to Thai social structure and beliefs, Riggs explained that "They make it difficult for the members to reach decisions, especially on policy or program goals. Hence the associational interests remain largely potential, only rarely becoming effective or reaching any high degree of intensity. Particularism and eclecticism result in the formation of diffuse programs of a very general character. Lacking specificity and focus, they lose penetrating power and tend to make little impact on government''. Girling, 1981, as cited in Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 84. 133 different from the model of Western industrialization and democratization in that under the bureaucratic polity neither the business nor the middle class had any significant role in forcing the government to account for their interests. The lack of financial as well as political power among the business and middle class has been explained by Laothamatas to be partly due to the ethnic composition of Thailand's business community.59 While the indigenous people remained within the agricultural or the public sector, businesses were dominated by largely European and Chinese firms. Chinese business associations, up to the time of the 1932 revolution, were dominated by members who were Chinese immigrants, being neither culturally nor legally Thai. It was not until after the 1932 revolution that the first business association of Thai citizens, the Siamese Chamber of Commerce, was formed by native Thai together with Sino-Thai merchants. The Association for the Promotion of Siamese Trade and Commerce and the United Merchants of Siam were two other Thai business associations to follow. Governments during the same period saw the development of these Thai business associations to be in concert with their own policy which was to weaken foreign control on Thailand's economy. However, the government refused to provide neither material nor legal support to the business associations of Thai citizens. In comparison to European and Chinese business associations, Thai business associations had small memberships and limited Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 23. 134 in financial resources, thus the lack of official support soon drove Thai business associations to a decline. The anti-Chinese sentiment which was instigated two decades before the ending of the absolute monarchy was eventually translated into policy by the post-1932 governments. Through the years under the rule of the military leader, Plaek Phibunsongkram (1938-1944 and 1948-1957, referred to as Phibun in most literature), economic policies which deviated from the previous governments were initiated. While previous royal governments had mainly refrained from direct involvement in commerce and industry, the government under Phibun changed its outlook. Central to government policy was the issue of national independence60, which had partly set the stage for the revolution. Through the annual increase in its budget, the government established a number of public enterprises and through a series of legislative measures, it either nationalized or reserved certain businesses61 for only Thai citizens or firms which had government or Thai citizens as major shareholders. Preservation of national independence was clearly translated into economic policy which involved the increase in government role62 in economic 60 Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 25. Laothamatas pointed out that "Preservation of national independence, including economic independence, and improvement of the livelihood of the people were two of the six pillars of the platform of the group of military and civil bureaucrats who led the democratic revolution". Ibid. ,25. The businesses reserved only to Thai citizens or to firms in which governement agencies or Thai citizens were major shareholders were listed as "...oil refining and distribution, shipping, rice exportation, animal slaughtering , and even food hawking on government premises''. Ibid., 25. Laothamatas cites that "Accordingly, the percentage of the annual government budget devoted to economic affairs was increased from 21 percent during the years 1922-1931 to 30 percent during the years 1932-1941". 135 development through its direct investment and reservation of certain business for indigenous Thais. By the late 1940s, the ethnic Chinese, through their closer cultural and commercial relations with the indigenous people, became clearly dominant in the Thai economy, taking over various sectors of business once in the hands of the Europeans. The government's economic nationalism which appeared to be marked by adverse effects on the Chinese were prevalent during the first phase as well as the second phase of Phibun's rule. The first phase (1938-1944), coincided with the time of World War II when Phibun as a Japanese ally attempted to repress the anti-Japanese activities being carried out by the Chinese in Thailand.63 During the second phase of his rule (1948-1957), on the grounds that China had become communist, Phibun took sides with the US in the Cold war and thus continued his political harassment of ethnic Chinese.64 The Chinese merchant, on the other hand, realized that reaction through political means on their part would be confrontational and provoke further repression. They thus chose to abide with the restrictions and sought nonpolitical means65 to deal with the restrictive laws. The political climate of this period indirectly Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism'', 25. The government's economic nationalism during World War II were reinforced by "...unscrupulous crackdowns on the organized activities of Chinese communities...In Bangkok, suspected Chinese schools, newspapers, and comunity organizations were closed". 64 Ibid., 26. Laothamatas notes that Chinese businessmen were adversly affected as more than 150 Chinese firms were raided between November 10, 1952 to January 24 1953. 65 Ibid., 26. The nonpolitical means used are described by Laothamatas "Small businessmen either gave bribes to law enforcement officials or had their firms registered under the names of Thai citizens...Large firms which by nature require greater continuity and certainty prefered to Thai-ify their corporations by inviting politicians or bureaucrats to join their executive boards". 136 encouraged the formation of more Chinese associations because businesses in the same line saw the need to exchange information in formulating nonpolitical response to government regulations and harassment. To survive the nationalistic policy of the government, the Chinese associations avoided any open lobby for or against particular economic policy. According to Laothamatas, while Chinese trade associations proliferated during this period, " group-based, public policy-oriented activities of business were kept to a minimum".66 4.74 The New Course of Development; In 1958, a coup against Phibun brought another military leader, Sarit Thanarat, into power and beginning in the years under Sarit's rule, Thailand underwent a new course of development which has continued to the present. By way of dictatorship and through absolute control over the military and the police, Sarit instilled fear and thus created a climate of political stability.67 With encouragement and assistance from the World Bank and the US, nationalism and state-led industrialization policy were replaced with the promotion of private enterprise as the engine of development. The role of the government was then reduced only to provide the economic infrastructure and to establish a legal and political order favorable for the growth of the private enterprise.68 Patron-client relations was once again revived as Muscat observed Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 26. 67 Muscat, 1994, "The Fifth Tiger: A Study on Thai Development Policy", 87. Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 27. 137 "Drawing on traditional Thai norms respecting the relationship between powerful patrons and dependent client, Sarit defined the role of the prime minister as that of a father who would tend to the needs of the people, and to whom the people would, in consequence, owe their loyalty and respect".69 As the patron-client relations had traditionally been the moral basis for the monarchy's legitimacy, it became necessary for Sarit to restore the prestige of the monarchy as a symbol of the Thai nation and the source of all legitimacy. Equally important was that the monarchy would be "...a supportive source of his own legitimacy as the administrator of this system".70 In effect, Sarit had created a dualistic conception of legitimacy. Through Thailand's First National Economic Development Plan (1961-1966), Sarit's government had clearly set out to promote the role of private enterprise, but notably lacking was the vision for business associations. After Sarit's death in 1963, Thailand under the rule of yet another military leader, Thanom Kitikachorn, continued the country's development under the same authoritarian system. Through the responsibility of the Ministry of Commerce, two pieces of legislation: the Chamber of Commerce Act and the Trade Association Act, were issued to formalize and structuralize the existing system of associations.71 It was clear that the two Acts were an attempt on the part of the government to control business associations since no opinion of the business community was ever sought in the development of either act. 69 Muscat, 1994, "The Fifth Tiger: A Study of Thai Devlopment Policy", 87. 70 Ibid., 88. Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 28. 138 The status of organized business was heightened only in 1971 when the government incorporated in the Third National Economic and Social Development Plan its intention to promote business organizations. According to the Plan, the government was assigned the task to encourage the participatory activities of organized business in the government's formation of economic policies.72 However, Laothamatas suggests that business associations between the period 1966-1973 still projected several weaknesses and remained excluded from the economic policy formation process.73 This further led to Laothamatas's analysis that " associations during this 1966-1973 period did not effectively function as interest groups in the manner found in liberal democratic regimes. Rather, the more active and successful ones worked as subsidiary policy instruments of the government".74 In fact, Montri termed the form of interaction between the government and organized business during this period as "state (authoritarian) corporatism".75 It remained a valued practice among leading Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 29. The tasks which the Plan assigned to the governement are cited by Laothamatas as follows: l)Encourage business to organize, especially in pivotal sectors such as exports, tourism and finance; 2) Encourage the participation of business associations in various committees working on problems detrimental to national economic development; and 3) Encourage the establishment of a joint public-private committee in charge of the improvement of coordination between the government and the private sector. Ibid., 30. The members and leaders of business associations during this period had relatively little education as Laothamatas points out that "Even among the presidents, only 43 % had studied beyond high school, and nearly 15% had no formal education other than elementary school, if any". The associations also depended on a few wealthy members since membership fees provided insufficient revenue. In addition, these associations did not see their central task to be the representation of group interests to the government but rather to provide recreation and social welfare. Therefore, most associations were never or seldom involved in any type of joined government committees or activities concerning government's decision towards business and trade. 74 Ibid., 31. Montri, 1979, as cited in Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism'', 31. 139 businesses to invite senior officials to join their board of directors and to seek connections with powerful politico-bureaucrats. Because favoritism and nepotism was a norm in Thai society, clientelistic relations could provide businesses with privileges and favors from the government. The importance of clientelism in the relations between the businesses and the government is confirmed by Laothamatas's observations "For businessmen then, manipulating clientelistic ties with high officials for their particularistic interests was as important as, if not more important than, lobbying for or against categoric interests".76 Up to this time, business associations were weak in their functions as interest groups but nonetheless, they were the strongest among other functional groups. Agricultural organizations were uncommon. Those that existed were largely created for the purpose of agricultural development and were supported under close supervision from the government for security purposes. Outlawed for fourteen years, labor unions were not allowed to operate until 1972. 4.75 The Brief Democratic Years; The years between 1973-1976 were Thailand's years of brief democratic experience when the demand groups77 of students, peasants, and factory workers brought down the almost two decades of authoritarian rule. Because the political climate was 76 Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 31. Ibid., 32. Laothamatas describes these demand groups in the same manner which Lloyd Rudolph and Susanne Rudolph describe the case of India "...these demand groups were loosely organized, financially poor, and lacking in professsional staff. They relied less on professional expertise and lobbying skill than on symbolic and agitational politics". 140 dictated by public resentment towards nepotism and corruption and the abuse of official power which strongly characterized the past authoritarian regime, clientelistic relations between officials and businesses were no longer accepted. Being subject to strong public criticism, the presence of military-bureaucrats on the boards of large businesses declined. At the same time, the liberal political climate had brought a large number of persons with business affiliations into political parties, House of Representatives, and some cabinets, through election. The strong presence of business persons in the government's legislative and executive positions was clearly a notable change in the composition of the political elite. From Laothamatas's analysis, such change had brought about a political climate which was highly supportive of favorable government-business consultation.78 But in terms of formally organized interest groups such as business associations, the brief democratic years did not provide a favorable environment for the progress of such functions. The political arena was marked by the activities of the demand groups: strikes, political protests, and massive demonstrations. It was evident that the problems of these demand groups were the government's priority since they posed immediate threats to their survival. But by the same token, the government could not afford to formulate any long term plans which were crucial to strengthen functional interest groups. Rather, the liberal climate had indirectly favored government-business relations. Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism'', 35. 141 4.76 Back to Authoritarianism; The democratic period was short-lived when in 1976, the authoritarian rule was brought back, led by a civilian bureaucrat supported by military forces. Organized business groups were either a target of suspicion or were of minor interest to the government. Attempts to strengthen business associations were not furthered in the Fourth National Economic and Social Development Plan approved by the government of this period. However, the business associations were endowed with prestigious leaders who now returned to their associations after their rise to prominence during the open politics years. To develop increased cooperation among their associations, these leaders together formed a loosely organized Joint Standing Committee on Commerce intended to serve as a forum for discussions of their mutual concern and for formation of a common position.79 As the government was faced with increasing problems of trade deficit, the Joint Standing Committee in May 1978, proposed the formation of a joint public-private committee to find proper solutions. Such a consultative committee was formed in June of the same year, but the working relationship of the joint public-private committee was far from successful. While the government was viewed by business to be unenthusiastic in putting their advised solution to implementation, the government saw business to be impatient and accusative. Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 36. 142 4.77 Beginning of the Semi-Democracy Years; Beginning in 1979, with an election scheduled by the military leader, Thailand was steered once again towards semi-democracy rule. Under the leadership of the army commander, Prem Tinsulanond, major parties led by businessmen were invited to join the government. But despite the government's desire to see a more effective involvement of organized business in economic-policy making, most informal discussions between the government and organized businesses were unfruitful. Business saw the problem to be the government team's ineffectiveness in "...translating their demands and opinions into policy action".80 In the business association's opinion, the success of a joint public-private committee at the national level would require formal and regularly scheduled meetings with the presence of the prime minister.81 By the proposal of the Thai Chamber of Commerce (TCC), the Association of Thai Industries (ATI), and the Thai Banking Association (TBA), the Joint Public and Private Sector Consultative Committee (JPPCC) was formed in June 1981. The committee consisted of representatives from the three business organizations and cabinet ministers responsible for economic affairs. Between 1983-1984, similar committees at the provincial level were organized under the sponsorship of the government. Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 39. 81 Ibid., 39. 143 4.78 Renaissance of the Monarchy; Amidst the political economic development in Thailand, a significant authority figure in contemporary Thai political-economy, the monarchy, reemerged after the 1973 revolution. The role of King Bhumipol (Rama IX) has set Thailand apart from other developing countries in terms of its political economic experience. Such was first witnessed when the king intervened to settle the political turmoil and the violence of the 1973 revolution. This incident is appropriately summed up by Keyes: "The king was heard, and the 1973 Revolution ended. Although the king's action forced the military from then on to share power with civilian politicians, including representatives from the vocal urban middle classes, its most significant effect was to reverse the relationship between monarch and government that had existed since the 193 2 Revolution. The king was now no longer a mere symbol to be manipulated by the government in power; he had become a significant center of authority in his own right".82 The monarch's role then changed from Sarit's intention in his restoration of the monarchy's prestige. By his personal characteristics, King Bhumipol had been able to intervene in the country's times of political crisis and resolve the open conflicts among the most influential political figures; a role not anticipated by Sarit. In times of peace and stability, the king's role and his presence remain significant and are reflected in the government's policy considerations. Drawing from historical events and understandings of the foundation of Thai society, Muscat accurately portrays the importance of the monarch in contemporary Thai Keyes, 1987, as cited in Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 129. 144 political economy. Muscat's analysis indicate that the renaissance of the monarchy has affected Thailand's economic development to some significance. One most relevant to this study is cited by Muscat as King Bhumipol's effort in rural development, particularly his keen interest in agriculture, especially irrigation as he is a trained hydraulic engineer.84 From the monarch's role in rural development, Muscat further emphasizes that "...he has come to be revered as the embodiment of the traditional Thai concept of the righteous Buddhist king. The monarch's unrivaled moral position has enabled him to grant, and withhold, legitimacy from rival contenders for power at times when constitutional process has been abrogated or threatened. In this very important respect, the political evolution of Thailand has been unique among developing countries, not easily fit into general models of Third World authoritarianism and political development".85 King Bhumipol's direct involvement in local development projects began during the 1950s and 1960s by his own initiative, through various small scale projects funded by his own finances. Over the years the number of projects increased and the Royal Projects were then designated as Royal Initiation which implies that the King's project ideas are to be included as part of the regular budget and programs of the responsible ministries.86 The role of King Bhumipol in rural development has significantly enhanced his status within the contemporary Thai political economic arena as stated by Muscat "The significance of these projects, apart from their local impact, lies in the personal identification 83 Muscat, 1994, "The Fifth Tiger: A Study ofThai Development Policy", 129. 84 Ibid., 130. 85 Ibid., 127. 86 Ibid., 130. 145 of the king with the enhancement of village life as a primary objective of economic development and his professional, hands-on involvement in these projects as a working, rather than merely symbolic, monarch".87 King Bhumipol's role thus directly as well as indirectly relates to the well-being of the rural community, the majority of whom are farmers. 4.8 Interest Groups from the Contemporary Perspective of Water Allocation: The above summary of Thai political economic development is indicative of the roles played by the various groups or person in policy decisions and of the attitudes which have nurtured such roles. In general water users in Thailand can be broadly categorized into three large groups: 1) business which consists of manufacturing and service industries; 2) agriculture; and 3) residential consumers. Business and agriculture are the two important groups which are subject to the debate of water pricing. While businesses pay close to nothing for their water use, agricultural users are exempted from any charges altogether. On the other hand, residential consumers are subject to a structured water pricing scheme. Although statistical data indicate that residential consumers are still being subsidized through low water price, this is a different issue which this study will not deal with. At this point, the focus is on the fact that water allocation in Thailand and the feasibility of water 87 Muscat, 1992, "The Fifth Tiger: A Study of Thai Development Policy", 30. 146 pricing concern the issues of interest groups conflict and the regime of open-access to water in Thailand. These two issues are somewhat interrelated. 4.9 Olson's Theory of Collective Action and Interest Groups in Contemporary Thai Political Economy: To understand the role of interest groups in terms of their influence on the decision making process of the government regarding such policy as water pricing, Olson's theory on the logic of collective action provides the most appropriate explanation for the rational of the various interest groups concerned and their likely behavior. Olsen refutes the general perception about group behavior which assumes that groups of individuals with common interests would act on behalf of their common interests much as single individuals are expected to act on behalf of their personal interests. This is because, while all of the members have a common interest in obtaining a collective benefit, they do not necessarily have a common interest in paying to achieve such benefit. According to Olson, "...unless the number of individuals in a group is quite small, or unless there is coercion or some other special device to make individuals act in their common interest, rational self-interested individuals will not act to achieve their common or group interest".88 The explanation Olsen uses to extrapolate such statement is that there are three separate but cumulative factors which inhibit larger groups from furthering their own interests: 1) the negative correlation between the number of members Olsen, 1965, "The Logic of Collective Action: Public Goods and the Theory of Groups", 2. 147 and the fraction of the total group benefit that any person acting in the group interest receives; 2) the negative correlation between the size of the group and the likelihood of oligopolistic interaction that might strengthen the act to further group interests; and 3) the positive correlation between the number of members and the organization costs which heightens the difficulty in obtaining any collective actions to achieve group interests. These are the reasons why such large groups which Olsen refers to as latent groups, lack the strength to further their interests. However, if these latent groups are to be coerced or stimulated with certain selective incentives they will posses the capacity for action, and by acting on this potential power to achieve its group interest, such a latent group becomes a mobilized group. A latent group is thus distinguished by the fact that none of the members has any reason to take action towards achieving group interests, unless coerced or provided by selective incentives. This is usually the case when the action of one member whether does or does not contribute to furthering group interest, has no significant bearing on other members. On the other hand, small groups which Olsen refers to as either privileged or intermediate groups, can usually obtain a collective benefit through the voluntary, self-interested action of the members of the group since the small number of members makes the individual actions of any one or more members in the group noticeable to any other individuals in the group. A small group's capacity to act is further strengthened when it comprises of members which have highly unequal degrees of interest in the collective benefit. 148 Drawing from this, the above information on Thailand's development of interest groups follows Olsen's conclusion of by-product and special interest theory such that, "...agricultural interests of the country make up large, latent groups that can organize and act effectively only when their latent power is crystallized by some organization which can provide political power as a by-product; and by contrast the business interests generally can voluntarily and directly organize and act to further their common interests without any such adventitious assistance. The multitude of workers, consumers, white-collar workers, farmers, and so on are organized only in special circumstances, but business interests are organized as a general rule".89 Throughout Thailand's political economic history, there have been few interest groups most of which were in the form of business associations. Moreover, they were either created or closely supervised by the government and their . . . i 90 activities were weak. 4.10 Contemporary Thai Political Economy - A Model of Liberal Corporatism: Whether within interest groups or between the groups and the government, clientelistic relationships are the norm. Such a pattern fitted Riggs's identification of Thailand's political regime as one of a bureaucratic polity. However, more recent evident of contemporary Thai political economy suggests differently. While Laothamatas agrees that Riggs's model of bureaucratic polity is very valuable for explaining Thailand's political Olson, 1965, "The Logic of Collective Action: Public Goods and the Theory of Groups", 143. Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 4 . 149 experience in the first four decades following the 1932 revolution, he sees that Thailand began to outgrow this model in the 1970s.91 A thorough study of business associations and the new political economy of Thailand by Laothamatas most clearly identifies the present Thai state as one of liberal corporatism whereby "... organized business has formed politically effective extra-bureaucratic groups and the policy of the government is no longer determined solely by the bureaucratic elite".92 Laothamatas poses three arguments to support his claim: 1) that business associations have become autonomous and effective extra-bureaucratic interest groups93; 2) that in recent years, organized business has been able to initiate, transform, or block major policies or legislative measures put forth by the government; and 3) that the present system of business associations honors societal group autonomy in relation to the state as well as free competition among groups and therefore, the existing legal and institutional relations between the government and organized business has not been a notable hindrance to the autonomous and effective role of business in the public policy process. By the term liberal corporatism, Laothamatas describes the Thai political economic situation as consisting of both political collective work and economic collective work of business associations. Political collective work are the efforts of business 91 Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism", 91. 92 Ibid., 14. Ibid., 12. Laothamatas points out that the fact that the organized business played an initiative role in the creation of the Joint Public and Private Sector Consultative Committee (JPPCC) systems which became the centerpiece of government-business relations since the early 1980s, can substantiate this argument. 150 associations to influence government policies and legislative measures while economic collective work are the activities that the business associations undertake to improve their economic or business conditions. Such activities generally do not allow for governmental supply or subsidy and at the same time, pose financial and administrative demands over which an individual member alone can handle. However, recent experience in Thailand has shown that through the pooling of resources and knowledge of member firms, business associations have begun to provide these necessary functions. In sum, contemporary Thai political economy is characterized by the influence of interest groups on the policy and legislation of the government but with the government being an autonomous actor, having its own issues and ideas. The notable feature of liberal corporatism lies in what Laothamatas describes as "... a high degree of autonomy and spontaneity, and by the central role of private groups in the creation and operation of their representative associations, as well as systems of government-group interest mediation".94 On the one hand, Thailand is seen to be emerging as a liberal corporatist state, but the perception that the interactions between business and government officials are founded on a clientelistic relations is a model many continue to use in their attempt to analyze Thai political economic related issues. Laothamatas warns that the implications for the extensive presence of clientelistism should not be overstated. In fact, he proposes that currently, there are reversed direction of dependence between public agencies or officials and business associations, as he refers to as "reversed clientelism". In Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: Fron Bureaucratic Polity to Liberal Corporatism", 14. 151 this respect, business assistance and cooperation is valued either in terms of financial support, information, or representational duties in such times as the present when officials are finding it an increasing burden to adjust to the more complex tasks in dealing with the rapid change in the economy. In other words, there is mutual dependence between the government and the private sector, a feature distinctively different from the past clientelistic relations of the bureaucratic polity times. Thailand under the model of liberal corporatism is seen by Laothamatas to be subject to one weakness, that is, the popular sector has been left out of the policy-making process. It is clearly the case that farmers and worker groups have not been part of the Joint Public and Private Sector Consultative Committee (JPPCC) system. One reason being that senior officials are opposed to the inclusion of such groups, remaining to believe that it would "... slow down and complicate the deliberation process of the system to the point of unmanageability".95 There are also criticisms that government-business dialogues have not included socially relevant issues, such as environmental and income distribution issues. However, it will be pointed out in the last chapter that in cases concerning issues of water allocation and water pricing, the agricultural sector though not organized as the business sector, posses a certain degree of bargaining power, through its important role as the producer of food supply and its close economic relations to the business sector as the supplier of raw materials. And as significant if not more, the monarch's interest and support of the agricultural sector is an indicator of the sector's importance to the government's Laothamatas, 1992, "Business Associations and the New Political Economy of Thailand: Fron Bureaucratic Polity to Liberal Corporatism'', 171. 152 policy considerations. But first, the next chapter looks at the various sectors in terms of their water demand and their implications for future expectations. 153 CHAPTER 5: THE BANGKOK METROPOLITAN (BMR) WATER DEMAND PROFILE Reviews have shown that studies on water allocation problems in Thailand give little attention to the role of interest groups in policy decision-making. If mentioned at all, interest groups are generally depicted in terms of their negative influence on an elected government. While the following synthesis fundamentally agrees with the study by Kaosa-ard and Christensen in terms of the problems of market failures and government failures identified, it proposes that in order to apply such economic policy instruments as water pricing, the role of related interest groups must be more carefully examined. The characteristics of each interest group and its values determined by tradition and culture must also be taken into account. These findings will, in turn, help determine the effective way by which water pricing could be employed. Water-related issues have been addressed in the previous chapter; this chapter provides a demand profile of the water in the BMR in order to illustrate that there are various interest groups with a stake in the matter of any policy change concerning water. The political feasibility of such a policy alternative as water-pricing depends largely on the support group it can develop. It is therefore important to identify the interest groups involved, their interests at stake, their resources, and the channels of their interaction. A demand profile is likely to provide an overall picture of the social and political characteristic of each interest group and how they relate to the larger political system. 154 The argument which this study supports is that interest groups which are becoming the important determinants of Thai policy decisions are organized and interested in pursuing long-term solutions to problems affecting their interests. Through the profile of water demand in Bangkok this chapter intends to provide the quantitative aspect of demand to more clearly determine the interests of each sector in the economy which are likely to be the drive for each interest group to act. This is based on the assumption that the Thai political and economic structures have developed into a new model of liberal corporatism. The reason being that business leaders and technocrats have become an important force in the policy arena when following the troubles of the oil crisis and economic security became an issue for political stability for the government. Akira confirms this by his observation that " leaders and economic technocrats were invited from both the government and the private sector to specifically cope with these economic difficulties. Although technocrats had no real power in Thai politics, they steadily increased their influence in the decision-making process on economic issues. This fact suggests that domestic capitalist groups and their political agents are now emerging as a significant counter-force in Thai politics".1 Chapter 5 describes the overall characteristics of the water supply situation and, in turn, the water demand profile within the BMR. By looking at the overall economic growth pattern and its impact on the change in water demand and consumption behavior, the chapter outlines current estimations and projected trends of BMR's water demand. The overall trend of nature water demand is projected through the anticipated change in each sector, by either 1 Akira, 1989, "Capital Accumulation in Thailand 1855-1985", 282. 155 economic forces or related governmental policies. The objective is to summarize the water demand implications which are assumed to, in turn, allow for further analysis of the interest groups anticipated stand in the policy of water pricing. 5.1 Geographical Information Located between latitude 6-21 degrees North and longitude 98-106 degrees East, Thailand's climate is governed by two monsoons: the south-west and the north-east monsoons. The south-west monsoon brings about heavy rainfall between mid-May to mid-October, while the north-east monsoon, relatively dry and cool, passes through during mid-October to mid-February. The country is divided into four geographical regions: the North, the Northeast, the Central, and the South. The terrain of the North is of relatively high mountains while the Northeast and the South is flat with scattered hills. The Central Region where the BMR is situated can be described as flat and surrounded by mountain ranges with the exception of its south where the Gulf of Thailand lies. Normally long periods of warm weather characterize the Central Plain where the temperature during the day ranges between 33-38 degrees Celsius and drops to about 24 degrees Celsius at night. Rainfall within this region is the result from the south-west monsoon between May to October, and occasional depression storms. On average, annual rainfall within the Central Region is estimated to range between 1,00-1,400 millimeters.2 About 90% of rainfall occurs during May to October, in contrast to the lack of rain during November to April. 2 Vadhanaphuti et al. 1992, p. 197 156 I Figure 5.1 Monthly Distribution of Average Rainfall in the Central Region of Thailand (1960-1989) Average Monthly Rainfall Source: Tingsanchali ,1991, Assessment of Water Resources ami Demand by User Sectors in Thailand. The Chao Phraya River is the most important source of the Central region's water supply. In terms of water resource development, the Chao Phraya River basin is considered Thailand's most important geographical unit. The total annual water volume estimated to be available for the basin is 31,300 million cubic meters per year or 170 millimeters averaged over the area of the basin. However, it must be noted that the Chao Phraya River basin covers the north as well as the central region of the country. Although several water resource management issues within the basin would be better understood when both regions are studied in relation to one another, the north is beyond the scope of this study. Therefore, the following analysis will focus on the central region where the BMR is located. 157 The Bangkok Metropolitan Region (BMR) covers five provinces: 1.Bangkok and Thonburi, 2.Nakhon Pathom, 3.Nonthaburi, 4.Pathum Thani, 5.Samut Prakan, and 6.Samut Sakhon. For administration purposes the BMR is divided into two areas: the central city being Bangkok and Thonburi (also refered to as the Bangkok Metropolitan Area or BMA) and the suburbs of the BMA being the other five provinces. 5.2 The Bangkok Metropolitan's Water Supply Prior to looking at the water demand within the BMR, it is important to identify the current water supply available to the region. The BMR is located within the Central Plain of Thailand which is drained by the Chao Phraya River flowing from the north to the Gulf of Thailand. The region covers a flat low-lying alluvial delta area with an average elevation of 1-3 meters above sea level. The region obtains its water supply from two sources: 1) surface water, released from two major multi-purpose dams in Northern Thailand via the Chao Phraya River and 2) groundwater from its artesian wells. 5.21 Surface water Surface water allocation is the responsibility of the Royal Irrigation Department (RID) under the Ministry of Agriculture and Co-operatives. The RED assumes the authority to allocate water without charge to the irrigation systems which it operates as well as to MWA and PWA for urban water services. Because the Central Plain has no large reservoirs of its own, the 158 BMR depends on the water released from the two major multipurpose dams: the Bhumibol and the Sirikit dams. The water level of these two dams normally determines the water availability for the RID's allocation. The combined capacity of the two dams is 23.9 billion cubic meters. But it was only once in 1975 that the dams held their full capacity.3 Prior to the allocation to the Central Plain, a minimum amount of 6.65 billion cubic meters is set aside for electricity generation and for sedimentation. hi normal times, the RID allocates a total of 6.6 billion cubic meters of water to the Central Plain: 600 million cubic meters of which is the quota set for the Metropolitan Waterworks Authority (MWA) to provide piped water services for those customers within some provinces of the BMR. The allocation of 3.5 billion cubic meters for irrigation and 2.5 billion cubic meters for flushing out saline water from the Chao Phraya basin accounts for the remaining 6 billion cubic meters. Figure 5.2: Water Allocation in the Central Plains MWA (600 Mil.Cu.M.) SaMnity 9% Prevention (2.5 BH.Cu.M.) 38% Irrigation (3.5 BH.Cu.M.) 53% 3 Thailand Development Research Institute (TDRI), 1994, "Thailand's Drought Crisis". 159 Recent Shortage in Surface Water: Water shortages have become apparent in the last ten years, since the annual inflow to the two dams has decreased from what was once an approximate amount of 11 billion cubic meters to a level of less than 6 billion cubic meters in 1993. Since 1989, water discharge from the two dams has been greater than water intake. The situation was further aggravated by an earlier than expected end to the rainy season of 1993. In November 1993, the water level in the two dams combined showed a record low of only 5.6 billion cubic meters. Forecasts in mid-1993 suggested that water available from both dams would be around 3.5 billion cubic meters in January 1994. But on January 1, 1994, only 2 billion cubic meters was available for allocation; 1.5 billion cubic meters less than the amount forcasted. By January 31, 1994, the water level in the two dams had gone down to the lowest level ever recorded in the last 30 years of only 1.8 billion cubic meters. Therefore, the Central Plain was two-third short of water for their regular needs. During this same period, The RID was able to allocate only 500 million cubic meters to the MWA, a decrease of 25% from the actual quantity needed of 660 million cubic meters.4 Estimations suggest that if the amount of rainfall received during the rainy season is normal, the inflow to the two dams could reach 9.5 billion cubic meters, the average for the past 20 years, by November 1995. Under present levels of consumption, it is believed that the Central Plain will not suflFer a water crisis in 1995. However, the trend of continued increase in water 4 Metropolitan Waterworks Authority (MWA), 1993, Annual Report. It was stated that during the six-month period (January to June 1994) RID was to allocate supplies to MWA at about 2.8 million cubic meters per day against a daily demand of 3.6 million cubic meters; 25% short of regular requirment. 160 consumption by all sectors within the BMR suggests that the present level of consumption is unlikely to remain constant. Another significant factor that must also be taken into consideration is the fact that the Northern Region is experiencing high levels of water need which will have unavoidable effects on the Central Region's surface water supply. Comparatively, the Northern Region has the highest annual growth rate of irrigated area than any other region of the country. Between 1980 and 1989, the Northern Region's annual growth rate of irrigated area was 22,750 hectare per year or 47% of the country's total increase (48,430 hectare per year), resulting in an annual growth rate of water use of 175 million cubic meters per year or approximately 20.85% of the national total.3 Meanwhile, the Central Region continues to have the highest annual growth rate in irrigation water use due to its intensive agricultural activities. The trend in the Northern Region's high growth for water demand suggests that the Central Region will face further water shortages since it depends on a major run-off contribution from the Northern Region.6 Recent experience of water shortages in the Central Plain has been already witnessed by the significantly decreased amount of water flow into the Bhumibol and Sirikit Dams. Christensen notes that "...the Central Region's water arteries in the North are more preoccupied with new activities than ever, while the Central's own needs have not decreased correspondingly. Instead, the Central region's water requirements have grown in numerous directions."7 Tingsanchali, 1991, "Assessment of Water Reources and Demand by User Sectors in Thailand'', 27. 6 Ibid., 27. Christensen and Boon-long ,1994, "Institutional Problems in Thai Water Management: Challenges for new Legislation ",10. 161 5.22 Groundwater A report by the United Nations (1991) indicates that rainfall and seepage from rivers are the two recharge processes for the groundwater system in Thailand. The Lower Central Plain, especially the BMR, covers the largest sources of groundwater in the country. However, the area is considered to have unfavourable geologic conditions for groundwater replenishment through rainfall because approximately half of the area is covered by thick marine clay. Therefore, only approximately 5-6% of rainfall actually reaches the aquifer and this rate of recharge is regarded as the aquifer's safe yield.8 It is estimated that 600,000 cubic meters/day (219 million cubic meters/year) is the safe yield for the Bangkok Metropolitan Area (BMA). However, the current extraction rate of 1.3 million cubic meters/day exceeds the safe yield by more than twice. The consequence has been the rapid decline in the peizometric head of more than 50 meters thus resulting in approximately 10-14 centimeters/year of land subsidence. Another serious consequence of heavy groundwater extraction in the BMR is salt water encroachment at an alarming rate of 500 meters /year in the aquifer at a depth of 150 meters. It is further estimated that in the past nine years, the chloride concentrations in groundwater have increased to a level of over 600 milligrams/litre from what was 10 milligrams/litre. As a result, hundreds of wells in certain parts of the BMR have been abandoned. The DMR under the Ministry of Industry is the agency in charge of groundwater management and the licensing of groundwater extraction. Tingsanchali, 1991, "Assessment of Water Resources and Demand by User Sectors in Thailand'', 18. 162 5.3 The Bangkok Metropolitan Region's Growth Pattern The BMR covers an area of 775,815 hectares.9 Mekvichai divides Bangkok's urbanization into three broad stages: 1) establishment of the capital (1782-1867); 2) modernizing the city (1868-1959); and 3) urban eruption (1960-present).10 The urban eruption since 1960 can be characterized by the transformation of the economy from an agricultural to an industrial base. As a result, BMR's land use pattern has gone through dramatic changes. Observations suggest the BMR's land use change by province during the past three decades to be as follows:11 The BMA: The BMA includes Bangkok and Thonburi. Bangkok continues to be the national administrative, commercial, and industrial center. However, notable in the past ten years is the decline in residential areas. Instead, residential and service activities have substantially been accommodated by vertical developments. Thonburi remains to be a residential area while expansion in an increasing number of commercial and service activities along the major road network and the Chao Phraya River are becoming evident. Pathum Thani, once known to be an important area for rice production, has now been rapidly developed into BMR's residential and industrial area. Nonthaburi, previously considered to be the major area for orchards of Bangkok as well as of the country, has now been transformed into a residential area of the BMR. 9 See appendix. 10 Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management'', 8. 11 Ibid., 10. 163 Hgure U, Tie Bangkok Metropolitan Region (BMR) Source: Phantumvanit, and T. & Panavotou 1990 «T„J „ • •• • 164 Samut Prakan has evidently been transformed from an important area of rice paddies and fish farms to residential, industrial sites and golf courses. Samut Sakhon: what were once orchard and saltwater fish farm areas are now replaced by industrial sites. Nakhon Pathom: much of the major areas that once accommodated orchards and poultry and meat production are being replaced by residential areas. The development pattern of the BMR is described by Mekvichai as "ribbon development"12, characterized by mixed land use in the BMA and the outer provinces of the BMR. It is evident in the outer provinces that development of urban land use such as residential areas, industrial sites and golf courses have taken over a large proportion of the agricultural land. This change in land use patterns has significant implications for the changes taking place in the BMR's water demand. 5.4 Water Demand by Sector 5.41 The Agricultural Sector Agricultural production within the Central Plain is practiced through irrigation. It is estimated that the total area of cultivated land within Thailand was approximately 21.3 million hectares in 1991. Of this total, only 20% or approximately 4.4 million hectares is irrigated and Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 10. 165 most of these areas (2.1 million hectares) lie within the Central Plain.13 However, these irrigation systems are rudimentary. Infrastructural Problems: The majority of the irrigation infrastructure can be described as consisting of basic facilities, those of the conservation system which are simple drainage canals designed to simply release flood from the basin flatlands and to reserve water for the dry season. To a lesser part, the irrigation systems are those of the just-on-time system, the structured system, and the main canal system.14 These systems have been designed since the time when agriculture was the major sector of the economy between the 1850s to the 1960s.15 Today, the agricultural sector continues to depend on this basic infrastructure. It was in 1950 when the World Bank made its first loan for Thailand to construct its first dam which initiated the later extensive scheme of controlling the Chao Phraya River system. In fact, the largest impact of the government action in the agricultural sector of the Central Plains, before 1980, was investment in the irrigation system. Being a self-sufficient country in food production, it is noted that the motivation of the government could have been to maximize production for export.16 The Central Plains was deemed as a prime site for irrigation investment from an engineering point of view. Rice production benefited from irrigation development as this Ministry of Agriculture and Cooperatives, 1994, Unpublished Statistics. 13 14 Christenseo and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for New Legislation", 18. Just-on-Time system also refered to as Land Consolidation system 5-7%, Structured system 20%, Main Canal system 10-20%, Conservation system 40-50%. See appendix for further information on existing irrigation system in Thailand. 16 Siamwallaetal., 1993,"Agrkulture'', 110. 166 enabled multiple cropping in the dry season between November-May. It was in the 1970s, after irrigation systems were in place, that Thai farmers shifted to cultivate high-yielding varieties. Since then, rice has continued to be the dominant crop produced within this region. Diversification in Production: Diversification in agricultural production is noted to have occurred in two important phases. Between the 1950s-70s, agricultural production diversified into staple food crops such as cassava, kenaf, maize, and sugar. The second phase of agricultural diversification was notable in the 1970s as production of fiuits and vegetables, aquaculture, livestock, and tree crops became evident. But despite this diversification, rice production continued to show steady growth up to the 1980s because the irrigation system continued to allow Thai farmers to benefit from the technologies of the Green Revolution: the high-yielding rice varieties. The new commodities, on the other hand, had become an important input for the food processing industry.17 The agricultural sector of the Central Plain in the 1990s has been faced with critical problems of water shortage, especially in the dry season. The government has encouraged rice farmers to shift from the production of a second rice crop in the dry season to other crop types. But this efifort is believed to have not been well received. These dynamics within the agricultural sector have important implications for its water demand. The following outlines the estimations of water demand volume and the trends in the agricultural sector within the BMR. 17 Christensen, 1994b, "Thailand's Development Experience: Lessons for Growth Policy", 8. 167 Agricultural Water Demand Despite the substantial land use transformation being felt by residents of the region, in 1991, approximately 53.85% of the Bangkok Metropolitan Region (BMR) was categorized as farm land.18 An area of 421,541 hectare has remained under agricultural production. Figure 5.4: Area under Agriculture as a Percentage to Total BMR Land Area of782,696.5 Hectares: 1993. Area under Agricuture 421,541.44 Other U M ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ " ^ " ^ 46% Source: Unpublished Statistics from the Ministry of Agriculture and Cooperatives 1994. Li terms of change within the agricultural sector, Isarankura observes that there has been a transformation in the production structure in the BMR.19 In the six year period between 1981-1986, there has been a decreasing share of farmholding areas for rice production in all the provinces in the BMR, except Nonthaburi. More recent records, on the other hand, indicate that the share of rice production in farmholding land areas continued to decrease in 1991 in every Christensen, 1994b, "Thailand's Development Experience: Lessons for Growth policy", p . l l . Isarankura, 1990, "Emerging Urban-Regional Linkages: The Bangkok Metropolitan Region", 71. 168 province constituting the BMK However, rice production remains the dominant use of agricultural land.20 In 1991, with the exception of Samut Prakan, land use for rice production accounted for over 50% in every province constituting the BMR.21 Water Demand for Bice Production: Experiment results presented by a UN study22 (1990) indicate that high yielding varieties of rice requires an average of 9,400 cubic meters/hectare of water for its production cycle of 160 days during the wet season (June-October). As for the dry season, between November-May, the average water requirement for the production cycle would be 12,500 cubic meters/hectare.23 However, it is important to note that dry season rice production is done on a smaller scale when compared to wet season rice production. It is concluded from records of irrigation water use that wet season rice production is the major user of irrigation water, accounting for a much higher total volume of irrigation water use than dry season rice production. From the above information of land use and water requirements for rice production, further estimations may be done under the assumption that (1) total land used for rice production within the BMR is 247,025 hectares as recorded in 1991; (2) the total amount of 247,025 hectares is brought under rice production during the wet season and 12,351 hectares for dry See appendix under Agricultural Water Demand for more information on rice production area in the Bangkok Metropolitan Region (BMR). Ministry of Agriculture and Cooperatives, 1994, Unpublished Statistics. Tingsanchali, 1991, "Assessment of Water Demand by User Sectors in Thailand''. Ibid., 24 . The water requirement volume is measured for the period of 160 days from land preparation to the end of the reproductive period. 169 season24; and (3) the average water requirement for the wet season crop is 9,400 cubic meters/hectare and for the dry season 12,500 cubic meters/hectare. Calculations indicate that 160 days of BMR's wet season rice production (during June-October) requires a total water volume of 2.3 billion cubic meters while dry season crops during the 210 days of production require approximately 0.15 billion cubic meters. In total, rice production within the BMR has an annual requirement for water of approximately 2.45 billion cubic meters. Water Demand far Agricultural Production Other than Bice: Other than rice, agricultural production within the Central Plains include vegetables, fruits and flowers, tree crops, field crops, aquaculture and livestock. With the exception of aquaculture, the Ministry of Agriculture and Cooperatives categorize the area under the production of these products as non-rice agricultural production area. In 1991 non-rice crop production accounted for an area of approximately 120,098 hectares within the BMR. Meanwhile, the Ministry of Agriculture and Cooperatives recorded land use under dry-season crop production at 281,200 hectares. Of this total, 271,376 hectares are actually irrigated areas. After having accounted for dry-season rice production area, the area Tingsanchali, 1991, "Assessment of Water Demand by User Sectors in Thailand'', 24. Tingsanchali points out that based on the 1989 data from RID, total irrigation area was recorded at 3 million hectares while irrigation water use was recorded at 30 billion cubic meters per year. Therefore, available annual irrigation water was 10,000 m3/ha/yr. Judging from the water requirements in the wet season of 9,400 m3/ha and that in the dry season of 12,500 m3/ha, if total rice production area (247,025 hectares) is brought under cultivation in the wet season then the difference of only 6,000 m3/ha is available for dry season rice production. Therefore, we assume mat to achieve the yield which usually requires water at the level of 12,500 m /ha, the production area during the dry season must be of a smaller scale to compensate for the limited amount of water available. The area under dry season rice cultivation is estimated at 0.05% (600/12,500)of the wet season rice production area or 12,351 hectares. 170 undo* the dry season non-rice crop production that depends on irrigation water is estimated at 259,025 hectares.25 At an estimated water use of 8,176 cubic meters/hectare26 during the wet season and 10,731 cubic meters/hectare during the dry season, water requirement for crops other than rice in the BMR amounts to approximately .98 billion cubic meters per year in the wet season and 2.7 billion cubic meters in the dry season. The water requirement for non-rice crop production for both seasons totals to 3.7 billion cubic meters per year. BMR's Estimated Total Agricultural Water Demand and its Character: From the above analysis, total annual agricultural water demand within the BMR is estimated at 6.2 billion cubic meters. Groundwater makes up a minimal share of this estimate. As of December 1992, it was recorded that approximately 3.8 million cubic meters of groundwater is extracted annually from wells registered under the Department of Mineral Resources (DMR) for agricultural use.27 Ministry of Agriculture and Cooperatives, 1993, Unpublished Records show that the area of dry season crop production was 281,200 hectares between 1991-1992. When the area of estimated dry-season rice production is deducted from mis total, the area for dry season production of non-rice crops stands at 268,848 hectares (281,200-12,351 hectares). Meanwhile, non-irrigated area is recorded at 9,824 hectares. We assume mat this must be under the non-rice crop production area because rice production during the dry season is only possible by irrigation. Therefore, the dry season non-rice production area which depends on RID water allocation is estimated at 259,025 (268,848-9,824) hectares.The increase in me area of non-rice crop production in the dry season (from 120,097 hectare recorded under the wet season) may be the result of farmers' attempt to grow crops that are less water consumptive man rice. Instead of cultivating the second rice crop or leaving the land idle during the dry season, farmers may use the land for non-rice crop production. Further explanations on the calculation is given in the appendix under Agricultural Water Demand. The average amount of water required for non-rice crop prodution is estimated at 51.1 m /ha/day. The area under regular season production is calculated by the duration of 160 days whereas the area recorded as under dry season production is calculated by the duration of 210 days. 27 See appendix under Agricultural Water Demand. 171 After taking into account the groundwater use and the area recorded as non-irrigated, the actual demand that the agricultural sector poses on the RID still stands at 5.8 billion cubic meters. But since the RID is recorded to supply 3.5 billion cubic meters in total to the agricultural sector, it may be assumed that agricultural production in certain areas ( although considered as irrigated areas) do not have sufficient access to irrigation water and thus rely on rainfed methods of production. Li other words, the current level of water supply through the RID is insufficient for the agricultural sector's full capacity of production, those areas recorded under irrigated areas actually may not be benefiting from the irrigation services. As described, the pattern of agricultural production indicates, in part, a decline in subsistence farming.28 The pattern of agricultural production has diversified from traditional crops, e.g. rice, cassava, and sugarcane to non-traditional type of outputs, such as, livestock, fruit, vegetable, and flowers. These non-traditional crops serve mainly the rising demand in the city which has been experiencing substantial levels of urbanization as well as industrialization. Many of the commodities have become important raw materials for one of the major industries: the food-processing industry. Important to note is that although these nontraditional crops require less water per hectare than rice, they are more demanding in terms of water level control and drainage. Support for this point comes from a study by the World Bank (1987) which suggested that the non-traditional crops are technology and input intensive; the full potential of the inputs required for Isarankura, 1990, "Emerging Urban-Regional Linkages: The Bangkok Metropolitan Region", 71. 172 their cultivation can only be achieved under the condition that water availability is sufficient and controlled.29 Efforts to Reduce Agricultural Water Demand and the Outcome: In terms of government policies, one measure adopted by the government to overcome the water crisis due to the drought in the 1990s is to prohibit cultivation of the second rice crop. The rice farmers have been encouraged to plant alternative crops to replace water-intensive paddy.30 If this policy is to be accepted by the rice farmers, the trend in agricultural diversification will have implications for a decrease in water volume per hectare but much more demand for efficiency and consistency in supply. But judging from the calculated water requirements above, it appears that although non-rice crops are less water-intensive per hectare, the overall water demand is still relatively high. In fact, overall water demand for non-rice crops appears to be higher than rice. This could be the result of the larger area of non-rice crop production during the dry season which takes place in the areas that may have been left idle during the dry season when rice was the only type of crop produced for commercial purposes. In this case, shifting production from rice to non-rice crops may not prove to significantly reduce overall water demand. Although the information on the larger area under non-rice crop production during the dry season than the wet season in the BMR seem to suggest that there have been attempts by farmers to shift to less water consumptive products, the general perception still holds that rice Bonne et al., 1987, "Thailand Agro-Industrial Diversification issues and Prospects'', 43. Yoon, 1990, "The Last Drop", 43. 173 fanners have been reluctant to shift their production from dry-season rice because favourable market price of the yield outweighs the risk involved in finding a market for a new commodity. Moreover, the international trend for freer rice trade which resulted from the Uruguay Round conclusions as well as Japan's partial opening of its rice market are likely to be a further incentive for dry season rice production.31 TDRI also projects that despite the structural change in agricultural production, agricultural water demand is unlikely to decrease.32 This is due to the fact that the change in the agricultural sector will most likely occur in the rainfed areas where there is a comparative disadvantage. The present irrigated areas will continue to consume water at current levels. 5.42 The Industrial Sector The water demand of the manufacturing industry within the BMR illustrates the discrepancies between the pace of economic growth and the infrastructure required to accommodate the growth. The Thai government had changed its industrial policy in the 1960s when promotional measures were then granted to the industrial sector. But it was not until 1985 that the manufacturing sector overtook agriculture in its share of GDP. For three consecutive years, starting in 1987, Thailand gained double digit real growth rates with the manufacturing 31 Christensen, 1994, Unpublished Document. Quistensen further explained that one of tbe agreements in the Uruguay Round International Trade talks was to liberalize the agricultural market of the European Union. As a result, it is widely beueved that this will benefit Thailand 's agricultural sector. By the same token, the partial opening of Japan's rice market has been reported to result in high numbers of Japanese consumers turning to Thai rice. 32 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply'', 63. 174 sector within the BMR being the major contributor to GDP. The BMR has continued to be the center of growth and within this decade it is expected that the BMR's share in GDP will be as high as 75%. Although the country's economic growth rate is projected to slow down in the 1990s, it is still expected that annual growth will remain in the range of 7-8%.33 Industrial Water Demand The Concentration of Industrial Establishments and their Source of Water Supply: At the end of 1989, it was estimated that of the 51,500 major manufacturing establishments registered with the Department of Industrial Works, approximately 51.86% or 26,706 establishments were located in the BMR.34 The top five industries with the highest numbers of registered factories are fabricated products (4,799), textile and wearing apparel (3,443), transport equipment (2,918), machinery (2,326), and rubber and rubber products (2,020).35 Currently, the manufacturing establishments rely heavily on groundwater as their water source. A very small amount of MWA piped water is used due the insufficient service provided by MWA and the high price of piped water when compared to the cost of groundwater extraction. While the cost of pumping groundwater is less than 1 baht per cubic meter, the minimum charge of MWA piped water is more than 6 baht per cubic meter. Kaosa-ard and Kostrat, 1993, "Economic Instruments For Water Resource Management in Thailand". 34 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply', SO. 35 Ibid., 50. Also shown in appendix. 175 Statistical data of MWA categorize the tariff for water service to manufacturing establishments under its third type of charge: the industrial tariff MWA's records of industrial water use indicate that only 12.25 million cubic meters of water was supplied to 158 customers in 1992, and 11.87 million cubic meters supplied to 165 customers in 1993.36 This accounts for approximately 1.49% and 1.32% of MWA's total service volume in 1992 and 1993 respectively. More importantly, the amount is also less than 1% of what TDRI estimates to be the manufacturing sector's actual total water consumption of nearly 3 million cubic meters per day or more than 1 billion cubic meters per year.37 This enormous discrepancy indicates that groundwater is heavily extracted to make up for the difference. According to MWA, out of every ten private groundwater well owners, approximately nine are located within the MWA's service area and six use MWA's service.38 A study by the Japan International Cooperation Agency (JICA) suggested that groundwater constitutes over 85% of net consumption of water used for manufacturing purposes in the industrial sector. The balance was obtained from piped water supply, and a minimal part from rivers or other sources.39 Records on groundwater consumption as reported by the Department of Mineral Resources (DMR) in 1992 do not show a separate category for total consumption by the industrial sector within the BMR. But even assuming that the volume of water consumption which DMR records as business consumption were all industrial consumption, the total amounts 36 MWA, 1992, Unpublished Records. 7 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 51. This amount is corroborated by independent estimates of industrial wastewater discharge. 3* Ibid., 55. Japan International Co-operation Association (JICA) as quoted by Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 51. 176 to only 309.18 million cubic meters per year. This is extremely low relative to the estimated total amount of water that the industrial sector currently consumes, of more than 1 billion cubic 40 meters per year. This further suggests that a significant amount of groundwater consumption within the BMR is not even subject to the already low extraction fee charged by the DMR In other words, there is widespread groundwater extraction which is not within DMR's monitoring capacity. This amount can be approximated at 68% of industrial water used. Figure 5.5: Comparisons of Estimated Industrial Water Use of Piped Water and DMR's Records of Industrial Groundwater Use to the Estimated Actual Total Industrial Water Use. 1000 i % o % •$ z 900 800 700 600 500 400 300 200 100 0 ^Sifw,:i:!^,,,,!^:rw^;r!ith,-;!!;:,-,M.,, MWA's Rc'd of DMR's Rc'd of Est. Actual Industrial Pipe Industrial Industrial Water Groundwater Water Consumption Consumption Consumption Source: MWA 1993 Annual Report, Unpublished records from the DMR (1993), Sethaputra et al.,1990, Water Shortages: Managing Demand to Expand Supply. Sethaputra et al., 1990, 'Water Shortages: Managing Demand to Expand Supply", 55. 177 Industrial Establishments and their Effect on Water Quality: Biological Oxygen Demand (BOD) The growth of the industrial sector relates not only to the increase in the demand for water but also to the quality of water. In terms of wastewater discharge41, the manufacturing sector of the BMR, on aggregate, appears to account for a smaller discharge of BOD (Biochemical Oxygen Demand) loading than the domestic sector. Approximately one-third of BOD loading discharged into the water body within the urban area is from the industry while household discharge accounts for approximately two-thirds of the total BOD loading.42 However, there are exceptions in three notable provinces, Pathum Thani, Samut Prakan, and Samut Sakhon, where the manufacturing establishments are the larger source of BOD discharge. Further observation indicates that in all three provinces, two types of industry standout in overwhelming percentage of BOD discharge: food manufacturing and textile manufacturing. Overall, the top BOD-producing industries in the BMR are recorded to be textiles, food manufacturing, and fabricated metal products.43 Figure 5.6: The Three Provinces with Manufacturing Establishments as the larger source of BOD discharge than Households. Phantumvanit et al., 1994. "Applying Polluter-Pays-Principle: Time for Action". The majority of the following information on wastewater discharge and its substance by province is based on this study by Thailand Environment Institute (TET). 42 Ibid, 23. It was indicated that this amount can be estimated from the assumption that wastewater accounts for 80% of water consumption. Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 22, also noted that the manufacturing sector accounted for 26.8% while the domestic sources accounted for 73.2% of the total BOD load, 90% of which was discharged by residential buildings and restaurants. See also appendix. 43 Ibid. See appendix. 178 [Province | Pathum Thani Samut Prakan Samut Sakhon Type of Industry 1. Textile 2. Food Manufacturing 3. Electrical Machineiy etc. 4. Fabricated Metal Product 5. Industrial Chemicals 1. Food Manufacturing 2. Textile 3. Paper and Paper Product 4. Transport Equipment 5. Industrial Chemical 1. Food Manufacturing 2. Textile 3. Glass & Glass Product 4. Fabricated Metal Product 5. Plastic Product % of Total BOD 59.0 9.5 7.8 6.9 3.3 42.4 31.8 7.3 3.7 3.2 48.1 37.8 6.0 3.2 2.1 Source: Phantumvanit et al., 1994, in Applying Polluter-Pqys-Principle: Time for Action. Examples from Bangkok and Samut Prakan indicate that large manufacturing establishments, those with employees of 200 and over, are the major sources of BOD loading discharge. There are under 200 such establishments, but those within Bangkok and Samut Prakan alone account for 46% and 56% of the total industrial BOD loading of each province respectively. When combined, the BOD loading of the large establishments and the medium establishments with employees of between 50-199, accounts for nearly two-thirds of Bangkok's total and three-fourths of Samut Prakan's total. 179 Hazardous Waste In the case of hazardous waste44, the manufacturing establishments are the major generators. While manufacturing establishments account for 95.5% of the hazardous waste generated in the country, domestic sources account for approximately 0.6%.45 The BMR is estimated to discharge as high as 71% of the whole country's total hazardous waste. Projections by the World Bank (1991) indicate that hazardous wastes generated in the BMR will have tripled by the year 2001.^ Most notable are hazardous wastes generated in three provinces: Bangkok, Pathum Thani, and Samut Prakan. In terms of industrial types, the major sources of hazardous waste are fabricated metal products, electrical machinery, and industrial chemicals. Medical wastes are privately treated by the hospitals and generally not considered to be significant in the BMR. Efforts in Industrial Wastewater Treatment: Lack of Control and Facilities: Although manufacturing establishments are more strictly controlled than residential or service establishments in terms of wastewater treatment, it is believed that those outside of the Industrial Estates which account for a much higher number, discharge their wastewater without any treatment. Within the BMR, it is estimated that possibly one-half of the manufacturing establishments are meeting current effluent controls. Hazardous wastes in mis case, as specified by Thailand Environment Institute (TEI), include 1) heavy metal sludges and solids (HMSS); 2) acidic wastes; and 3) waste oil. Engineering Science, 1987, as cited by Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 22. Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for Legislation", 9. 180 Up to this time, the effluent control measures by the Department of Industrial Works (DIW) are based on an emission level of each manufacturing establishment. Still lacking is the consideration of the total ambient level of the water body. The BMR is currently just at the start of building its capacity for wastewater management.47 At present, one central hazardous waste treatment facility, the property of the Thai government established in 1988, is in operation. The Department of Industrial Works (DIW) leases the center to the private company who collects service fees and manage the operations of the center. It has become clear that BMR's problems of inadequate infrastructure for handling water demand increase and water quality control within the industrial sector which existed prior to the boom has been exacerbated further by the economic growth. Criticisms of the government's policy to decentralize manufacturing establishments into the outer provinces reflect the concerns that such policy will aggravate the water problems currently prevalent within the BMR It is believed that the prevailing failure in enforcement of regulations may make matters worse by spreading the water problems to an even larger area. The lack of improved wastewater monitoring and pollution control measures as well as qualified personnel do not make this a positive option. Rather than decentralizing growth, there is a greater tendency that the option will make the problems more widespread and uncontrollable. The spread into the outer provinces of the BMR where MWA's service system is not fully accessible will also likely continue to make groundwater a more preferred source. 47 Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for New Legislation", 9. 181 5.43 The Service Sector; The service sector in Thailand was initially left to take the course of growth propelled by surplus labour in the early post-war years.48 It was not until the early 1970s onwards that the government changed its passive role to actively promote the growth of the service sector. The term service sector involves several types of transactions,49 such as tourism, transport, banking, insurance, or overseas labor services. The sector also covers services of public utilities, defense and public administration, ownership of dwellings, and construction. However, the service industries relevant to the analysis of water demand in the BMR includes only certain activities within the sub-sector of the service industries categorized as "other services".50 The pattern of structural change in terms of the service sector has been noted by Phongpaichit to be substantially different from those witnessed by developed countries51 The usual hypothesis of studies used to explain the structural change of the developed countries generally assumes that the service sector holds a passive role in the development process. Expansion of the service sector is thus seen as the result of productivity and income growth in other sectors. As the productivity and income in other sectors, especially manufacturing, rise, the demand for services expands and contributes to the service sector. In this case, the development Phongpaichit and Chiasakul, 1993, "Services'', 154. Concepts and historical information of the service sector are drawn from this source. 49 See appendix. Phongpaichit and Chiasakul, 1993, "Services'', 164. "Other services",in this case, includes education, health, recreation and entertainment, hotels, retaurants, personal services, domestic services, business services, non-profit institutions and repair works. Ibid., 151-152. The concept of structural transformation in terms of the service sector is mostly drawn from this source which refers to Clark (1957), Kuznets (1966, 1971), and Fuchs (1969). 182 process is generally believed to begin in the industrial sector, whereby the growth in industries absorb labour from the agricultural sector. The growth in the service sector then follows as a result of the maturity of the industrial sector. The development process in the service sector of Thailand, as in most developing countries, proves to be different in that it has been expanding in advance of the growth in manufacturing. Even in the early stages of economic development when per capita income level was still relatively low, the service sector accounted for a large part of the country's economic performance.52 The trend of growth in the service sector over the years suggests that the overall sector grew significantly in terms of contribution to GDP, from 55% in 1980 to 58% in 1990. The government's active promotion of the sector started during the Third Economic and Social Development Plan (1972-1976) when tourism became the alternative for foreign exchange earnings needed to replace the declining foreign grants and loans.53 Certain types of service have also developed in response to the demand of the higher income groups who have benefited from the process of industrial growth. Golf course development is one example of the most recent forms of widespread land transformation in the BMR. It is the trend of housing estates to include golf courses in their developments in order to draw the high-income consumers who generally have this recreational interest. These development projects usually require large tracts of land, sufficient water supply to keep the lush appearance, and the proximity to roads for convenient access. With all these qualifications 52 Phongpaicbit and Chiasakul, 1993, "Services", 152. This has been attributed to two factors: 1) the inability to industrialize fast enough to absorb excess labour and in most cases the rural-urban migration exceeds the rate of labour absorption; 2) the high capital intensity of the industries limts the capacity of labour absorption by the industry. 53 Ibid., 157. 183 combined, the BMR is considered the prime area for golf course development. In the last few years, this has been witnessed by the large number of golf course development through the conversion of agricultural land within the BMR. The area of these golf courses range from 480 to as high as 640 hectares.54 According to the most recent study in this area, an average golf course in Thailand requires an amount of water up to 6,500 CMD.55 The promotion of golf course tourism is also becoming a common component of Thailand's tourism plans. Golf course developments have been observed to be included in those tourism master plans which receive a large part of Japanese development aid for the construction of tourism infrastructure.56 During the Fifth Plan (1987-1991), the service sector received high recognition and promotion from the government as the major source of foreign exchange and provider of employment. This is where "other services" contribute to significantly, despite the fact that its value-added contribution to GDP has been considered as relatively modest. Therefore, the trend suggests that "other services" will continue to be an important sector which the government finds necessary to recognize and facilitate further growth for the purpose of foreign exchange earnings and employment absorption. 54 55 56 Phongpaichit and Chiasakul, 1993, "Services", 159. Mekvichai, 1992, "The Bangkok Metropolitan Region: Sustainable Development or Resource Management", 13. Pleumarom, 1994, "Sport and Environment: Thailand's Golf Boom Review", 54. 184 Service Sector Water Demand This section on service sector's water demand will be limited to the selective sub-sectors which are considered as major water consumers. They include: approved accommodations (hotels), restaurants, hospitals, massage parlors, and golf courses. MWA officially reports total water consumption volume of the service sector all in one category which is inclusive of business, state enterprise and government agency. However, MWA's unpublished records of 1992 and 1993 indicate its sales volume separately by type of customer: residential, business, industrial, retail water vendors, and government agency. To more clearly identity the service business water demand from other sources, the following estimates will be based on MWA's unpublished records of its services to the sector it categorizes as business. Records show that MWA serviced an increased amount of water supply to its business customers from 301.33 million cubic meters through 275,736 connections in 1992 to an amount of 309.00 million cubic meters through 291,876 connections in 1993. This accounts for 36.60% and 36.96% of MWA's total service volume in 1992 and 1993 respectively. During the same period, the DMR recorded the BMR's annual groundwater extraction by the business establishments to be in the level of 309.18 million cubic meters through 2,748 registered wells.57 In sum, the service sector's annual water demand is recorded at approximately 618.18 million cubic meters. In terms of wastewater treatment, establishments in the service industries generally operate and maintain their own water treatment systems. Most commercial establishments have 57 Department of Mineral Resources (DMR), 1992, Unpolished Records. See appendix. 185 drainage pipes from their leaching pits to the storm sewer. This poses serious threats to the environment and public health since there is no strict enforcement of any regulations or standards for wastewater discharge in such cases. 5.44 The Residential Sector The majority of residential water services within the BMR are under the responsibility of either the Metropolitan Waterworks Authority (MWA) or the Provincial Waterworks Authority (PWA). Piped water supply was first introduced in Bangkok under a Royal Proclamation issued by King RamaV in 1909. The Department of Sanitation was instructed to procure and supply water in the capital city. This involved several operations: the construction of a reservoir, the trenching of ditches, and the setting up of a pumping station which performed the task of clarifying and filtering water to a non-contaminated form for distribution.58 Today, water is supplied predominantly through individual metered connections.39 The Metropolitan Waterworks Authority was established in 1967, and up to today is in charge of providing piped water services to the residents within Bangkok, Nonthaburi, and Samut Prakan. The three provinces cover an area of 321,992 hectares and an estimated population of approximately 7.85 million in 1994. MWA receives 660 million cubic meters of 58 Metropolitan Waterworks Authority (MWA), 1993, Annual Report. 59 Asian Development Bank (ADB), 1988, "Thailand Water Supply and Sanitation Sector Profile". 186 water allocation annually from the Royal Irrigation Department (RID)60 as well as extracts groundwater for its supply.61 Water Serviced to the Residential Sector: In 1993, MWA's report indicated its service area to be 78,440 hectares and the population within its service area to be 7.2 million. The records of residential meterflow connections further indicate that a population of 6.1 million received MWA's services in 1993.62 MWA thus had an 85% service coverage of total population in its service area. During the same year, MWA produced a total of 1.2 billion cubic meters of piped water but total water sales were recorded at only 836.1 million cubic meters or 68% of total production. The discrepancy between total water produced and water sales could be the result of Non Revenue Water63 (NRW)of approximately 32%. This amount seems reasonable when considering that MWA's level of Non Revenue Water in 1988 was 34%. Of the total water sales of 836.1 million cubic meters through 1,139,299 connections, an amount of 413.9 million cubic meters or 50% was sold for residential consumption through 842,264 metered connections. CO Due to the (bought in 1993, MWA received an allocation of only 550 million cubic meters, 110 million cubic meters short of its regular demand of 660 million cubic meters. 61 See appendix. Metropolitan Waterworks Authority (MWA), 1993, Annual Report and calculations based on Asian Development Bank (ADB), 1988, estimates as cited in Tingsanchali ,1990, "Assessment of Water Resources and Demand by User Sectors in Thailand'', 37. Non Revenue Water (NRW) is the water lost through technical deficiencies such as leakage and meter tampering. The Asian Development Bank noted that MWA has worked continuously on the reduction of NRW through several Bank-assisted projects. MWA was able to reduce NRW down from 42% of total supply in 1984 to 34% in 1988. 187 Figure 5.7: Residential Water Consumption through MWA's Service as a Percentage to MWA's Total Water Sale 1984-1993. Year Source: MWA 1993 Annual Report. Figure 5.8: MWA's Operations in 1993: Total Production (Million Cu.M.) Total Sale (Million Cu.M.) Residence (Million Cu.M.) Residence (Connections) Service Area (Hectares) Population (Million) 1,224.9 836.1 413.9 842,264 78,440 7.2 Total Sale Rsdnt. Cnsmpfn % Rsdnt to Total Source: MWA 1993 Annual Report. Services provided outside of MWA's area is the responsibility of the Provincial Waterworks Authority which was established in 1979. The area in the BMR, serviced by PWA, 188 is approximately 460,704 hectares covering an estimated population of 1.52 million. The PWA receives an annual surface water allocation of 100 million cubic meters from the RID.65 Trends within the BMR that have Implications for Increased Residential Demand for Water Services Population Growth: Despite the successful reduction in the country's overall population growth rate from 3% before 1980 to 1.4% in 1991, the population growth rate of the BMR remains high due to migration from the rural areas to seek job opportunities. The BMR accommodates 16% of the country's population. Total population of the BMR in 1993 was 9.38 million with 66% concentrated in the BMA. It is projected that between 1991-2001, BMR's population growth rate will be 2.3%; noticeably higher than the national rate of 1.4%.66 Growth in population implies that the existing urban service systems will need to expand substantially simply to maintain current service levels.61 Population growth within the BMR has been mainly from rural migration, triggered by the concentration of economic growth within the BMR. The pattern of population growth through rural migration is likely to continue well into the future because of the existing disparities in the 64 Phantumvanit et al., 1994, "Applying Polluter-Pays-Principle: Time for Action", 24. The estimate for both population under the Metropolitan Waterworks Authority (MWA) and the Provincial Waterworks Authority (PWA) is based on TEI's calculation of population numbers in those provinces. 65 As a result of the drought in 1993, the Royal Irrigation Department (RID) allocated only 50 million cubic meters to the Provincial Waterworks Authority (PWA). 66 See appendix. 67 Setchell, 1991, "The Emerging Crisis in Bangkok: Thailand's Next 'Boom'". The majority of information on the issues of concentrated population and economic growth and their impact on the development trend within the Bangkok Metropolitan Region (BMR) is cited from mis source. 189 level of economic activity and per capita income between the BMR and other provinces. In 1988, with 15.6% of Thailand's population, BMR had a per capita GDP of 87,032 baht by generating 754,651 billion baht; 50.1% of the country's total GDP.68 This was an increase from 1980 when with 14.8% of total population, BMR generated 290,664 billion baht, (accounting for 42.4% of total GDP), and had a per capita GDP of 42,156 baht. It has become obvious that as long as the geographical disparities in economic activity and per capita income remain, the BMR will continue to draw migrants at a pace beyond what the public utilities and urban services within the BMR can sufficiently accommodate. Even more so, the demand on urban services may increase beyond what is now anticipated through simply economic growth alone. Concentration of Income, High Rate of Household Formation and Changing Lifestyle: Setchell has observed that "economic disparities are not solely geographic in nature".69 He observed that while the economic performance has shown impressive results of household income growth, income is actually concentrated in fewer hands.70 In other words, there is a trend towards greater concentration of income as opposed to wider distribution among the residents of the BMR 68 Setchell, 1991, "The Emerging Crisis in Bangkok: Thailand's Next 'Boom"', A-8. "ibid., 7. 10 Ibid, 7. Setchell noted that within the Bangkok Metropolitan Area (BMA), Pathun Thani, Nonthaburi, and Samut Prakan (also refered to as Greater Bangkok (GB)), during 1975-1988, the share of total income by households in the bottom 20% of the household income spectrum declined from 6.05% to 4.51% while the share by households in the top 20% increased from 49.26% to 54.98%. 190 The situation is further aggravated by the fact that the increasing industrialization, higher incomes, growing consumerism, and other social changes have resulted in a high rate of household formation, notably higher than population growth rates. As a result of this trend, there is significant reduction in the average size of households.71 The significant change in household size coupled with the continuous population growth in the BMR has posed further requirements for community expansion, another most evident source of accelerated demand for water services. Community Expansion: The demographic and economic transformation within the BMR has been occurring through decentralized land development. Community expansion has been accompanied by the increasing share of residential land use to total urban land use as well as the significant increase in housing units built. The number of housing units built during 1974-1988 increased dramatically due to the rapid increase in population and households, and the factors that made it possible: rising incomes, financing availability, and housing developers' ability to respond. Vertical development of modern dwellings such as condominiums is recorded as the dominant housing type constructed within the metropolis in 1991 n Meanwhile, slum housing is on the decline relative to developer-built housing. But despite this decline, slum housing has become an increasingly important low-cost housing 71 Setchell, 1991, "The Emerging Crisis in Bangkok: Thailand's Next 'Boom"', 5. Setchell reported that during the 80s, while the population of the BMR increased by 29.2%, the number of households increased by 51.4%. In 1990, the average household size was 4.47 people, down from 6.23 in 1960. 72 Ibid., 10. 191 resource for a growing number of Bangkok residents, both in absolute and relative terms as the slum residents have increased in both numerical and percentage terms.73 A larger share of Bangkok's population lived in slum housing in 1990 than in 1974. In 1990, approximately one out of every five Bangkok residents lived in a slum. Moreover, population density in slums, measured in terms of people per slum dwelling unit, increased dramatically during the 1974-1987 period and appeared to be even greater in 1990. It is also the case that average household size in the slums is higher than overall average household size in Greater Bangkok.74 The concentration of income and the trends of increasing population within the slums suggest that the economic boom in the BMR has not been beneficial to an increasing number and share of population. Deteriorated living conditions of these slums have occurred amidst the economic boom and the housing construction activities by private sector developers. Typically, these slum houses lack access to proper services of sanitary water supply or waste disposal. 73 Setchell, 1991, "The Emerging Crisis in Bangkok: Thailand's Next 'Boom"', 12-14. In 1990, mere were 1,404 numbers of slums in Greater Bangkok (Bangkok, Nonthaburi, Pathum Thani, and Samut Prakan) with 194,224 dwelling units accommodating a population of 1,495,525 or 7.1 persons per unit. The slum population accounted for 19.6 % of Greater Bangkok population. Ibid., 13. It is reported that Bangkok slum areas were more populous and more overcrowded in 1990 than in 1974. While population per unit of slum housing was 6.39 persons in 1974, it was 7.7 persons in 1990. Setchell hypothesizes that dwelling units have been subdivided over time to accomodate new households and thus the reason for the number of residents per slum dwelling being higher in 1990. 192 Other Implications from the Trends The above information reflects the fact that while the demographic and economic transformation within the BMR has occurred at a rapid pace, there are large disparities in the populations' living conditions and their access to urban services. In other words, estimating Bangkok residents' domestic water demand simply by the overall view of BMR's population growth and economic performance would be oversimplifying the analysis. While statistics from MWA indicate that Bangkok residents consume approximately 40-50 litres (0.4-0.5 cubic meters) of water a day per person, the averaged amount masks the fact that there are excess in some areas and deficiency in others. According to a UN report on Population Growth and Policies in Bangkok, as of 1980, 66% of households in Bangkok had piped inside drinking water, 8% had piped outside water, 4% obtained water from wells and 2% from communal wells.75 The remaining 20% of households obtained water from other sources. As of then, it was estimated that at least 100,000 persons obtained water directly from canals and waterways that were grossly polluted by human waste and industrial effluents. More recent records of the Metropolitan Waterworks Authority (MWA) indicate that in 1993 residential water accounted for 842,264 connections with the total amount of water provided to residential customers recorded at 413.9 million cubic meters. This is estimated to be 75 United Nations, 1987,"Population Growth and Policies in Mega-Cities: Bangkok", 29. 193 serving a population of 6,103,044 , or 85% service coverage at approximately 190 litres (.19 cubic meters) per person per day. Although the numbers suggest that since 1980, urban water services have gained more coverage, the average does not reveal the fact that there is a wide range of level of usage. Greater coverage of water services seem to imply that more people in a wider area are being provided with the service. However, while MWA announced its estimates that the daily water demand of a typical family of five is 200 litres (40 litres per person per day), it is believed that on average people in metropolitan Bangkok actually consume a daily amount of water up to 400-500 litres per person.77 Associated with the higher income levels and consumerism are the living standards that require excess water. It is reported that today's activities need more water: flushing a toilet alone wastes at least 13-20 litres (.013-.020 cubic metres) per flush while a washing machine consumes 100-200 litres (.100-.200 cubic metres) per use. A bathtub also uses no less than 100 litres (.100 cubic metres ) and washing a car requires at least 100 litres (.100 cubic metres).78 These activities are obviously not typical to the living standards of the slum population nor an average Thai family. The argument here is not the issue of equality but more the fact that these disparities must be taken into account in the task of identifying the interest groups in the BMR. Especially Calculated based on records of Metropolitan Waterworks Authority (MWA), 1993, Annual Report and the estimates of Asian Development Bank (ADB) as cited by Tingsanhali 1990 that each connection (flowmeter connection) serves 7.246 people. 77 Metropolitan Waterworks Authority (MWA) Statistics as cited in Yoon, 1991, "The Last Drop", 18. 78 Yoon, 1991, "The Last Drop", 18. 194 in the case where the government's concern in raising water price has always been stated as the concern for burdening the urban poor. Accessibility to water-related services is a pertinent issue because it reflects the level of service provision and thus the government's stand and policy regarding the BMR's water issues. Increased accessibility generally implies convenience and thus higher level of water usage. In the BMR, the accessibility and thus convenience and high level of water use seem to be a more accurate description of the higher income level groups. While water use is widely subsidized, the group of population that needs to be subsidized the most are in reality denied proper access due to the insufficient level of service provision in their areas, i.e. slums. The situation seems to suggest that the population benefiting from the subsidies are actually the higher income groups who already have access to the services and also those who live or will be living in areas where service extension guarantees return on investment for water agencies. Residential Demand on Water Supply According to MWA's 1993 records, residential water use accounts for approximately 50% of its water sale or 413.9 million cubic meters, but more recently, MWA has announced that of the total 1.1 million residential and business water users, residential water use accounts for the greatest percentage (74.5%). During the months of October 1993 to April 1994, average residential water consumption was recorded at 41.95 cubic meters per bill. This amounted to 73.12% of total water serviced by MWA But the charge on residential water service during the 195 same period accounted for only 55.59% of total water charge collected by MWA. This could be explained by the fact that per unit water tariff charged residential customers is lower than that charged other sectors. Chi the other hand, the Department of Mineral Resources recorded that as of December 1992, residential groundwater consumption in the BMR80 was at the level of 199,145 cubic meters per day (72.68 million cubic meters per year), through a number of 1,639 registered wells. This averages to a daily extraction of approximately 16,770 liters (16.77 cubic meters) per well. While it is generally understood that less than 100 litres (equivalent to about 35 cubic meters per person per year) of water is sufficient to sustain daily personal needs81, records show that on average, the BMR population consume in excess of this amount. An average shower alone requires roughly about 100 litres of water. It is also questionable whether MWA's estimate of its residential customers' average consumption of 40 litres per person per day (200 litres for a family of five), is the result of an over-estimation of service coverage which makes each individual level of usage appear to be minimal when in fact the level of water usage by certain groups are much greater than the others. In such cases, the average tends to mask the underlying conditions of accessibility and thus actual consumption behavior. When the disparities in the consumption pattern and level can be identified between those in higher income groups and lower income group such as above, the concern of burdening 79 Metropolitan Waterworks Authority (MWA), 1994, Unpublished Record. 80 Department of Mineral Resources (DMR), 1993, Unpublished Record. Note that Nakhon Pathom is not included in the record because there is no registered wells in the province. See appendix. 81 Clarke, 1991, "Water: The International Crisis", 19-20. 196 the urban poor by raising water tariff appears to be less complex since there is an option to allow low cost water for a fixed amount of consumption considered essential for basic needs and a progressive rate as the amount of consumption increases beyond this amount. In sum, BMR's residential water demand is the total of MWA and PWA piped water supply to the residential sector and groundwater extraction from DMR's registered residential wells. The records of MWA on the annual services of piped water supplied to residents in BMA, Nonthaburi, and Samut Prakan stands at a level of 413.9 million cubic meters. While data on PWA's services are lacking, it may be assumed based on the pattern of MWA's customers' behavior that annual residential demand on PWA's services is likely to amount to 89.27 million cubic meters.82 The DMR records residential groundwater extraction at approximately 72.68 million cubic meters per year. Therefore, a conservative estimate of BMR's total annual residential water demand amounts to approximately 575.85 million cubic meters. Residential Pressure on Water Quality The substantial increase in water requirements has implications for water quality as well. Presently, there are no complete sewerage and central sewage treatment system in Thailand.83 Excreta disposal is done by means of modern toilet connected to septic tanks and leaching pit. Other residential wastes are normally disposed of directly into the waterways. 82 Calculated from 1) number of population in Pathum Thani, Samut Sakhon, and Nakhon Pathom of 1,528,616; 2) the average amount of water consumption by MWA's residential customers of 160 litres (. 16 cubic meters) per day (413.9 million cubic meters/7.2 million people).Therefore, demand on PWA services is 89,271,174 cubic meters per year. 83 Asian Development Bank (ADB), 1988, "Thailand Water Supply and Sanitation Sector Profile''. The majority of information on the issue of sewerage systems is from this source. 197 Presently, storm sewers drain into open canals which then discharge into the main rivers or directly into the mud of tidal areas. It is common that residential establishments have drainage pipes from their leaching pits to the storm sewer. Although illegal, these connections are widespread in areas where percolation is insufficient or desludging of the pits is not regular. There are secondary and tertiary drainage systems used as sewerage in the BMR, but drainage has lagged well behind the accelerated growth of the region. A study by the Asian Development Bank observed that, in fact, the coverage of this system may have been on a decline, due to the filling and obstruction of the ancient system of canals.84 Furthermore, the remaining canals as well as the more recent piped drainage system, have only been partially maintained and therefore, are incapable of handling stormwater drainage. The problem of land subsidence resulting from groundwater over-extraction has also affected the flow pattern and the capacity of the network. It is estimated that BOD generation is at the level of S3 grams per person per day in the BMR.85 Therefore, the amount of total BOD generated by the residential sector in the BMR can be estimated at approximately 497,124,206 grams a day. Sewage and wastewater treatment facilities for all six provinces of the BMR is within the responsibility of the Bangkok Metropolitan Administration (BMA) to plan, develop, and manage. 84 Asian Development Bank (ADB), 1988, Thailand Water Supply and Sanitation Sector Profile". Phantumvanit et al., 1994, "Applying Polluter-Pays-Principle:Time for Action". The estimate is based on the assumption mat wastewater amounts to 80% of total water consumption. 198 Many proposals for the solution to the sewerage and drainage problems have been made in the past.86 But most of the proposals did not materialize due to the high costs involved. To develop a sewerage system separate from the drainage system in the BMR is seen to raise major issues related to high investment needs and difficulties in constructing large sewers where traffic is heavy and space restricted.87 It has also been pointed out that the lack of appreciation of the benefits of proper sewerage among the beneficiaries and perhaps, the Government has resulted in low priority given to sewage and wastewater treatment plans. At this point, four sewage treatment plants for the BMR are at their initiation stages. But even assuming these facilities were in operation today, they would have the capacity to accommodate only one-fourth of the present total level of sewage discharge, which is estimated at 1 million cubic meters per day in the BMR.88 5.5 Summarizing Water Demand Implications: The rapid transformation in the demographic, economic and physical characteristics of the BMR in the past few years and the more than likely rapid extension of this pattern to the provinces beyond the BMR has led to the projection that the BMR will continue to be Thailand's center of growth well into the future. Meanwhile, the growth within the BMR itself will tend 86 Asian Development Bank (ADB), 1988, "Thailand Water Supply and Sanitation Sector Profile". It is outlined that the first master plans developed for sewerage and drainage dates back to the 1950s. Then a Master Plan for Sewerage and Drainage of the Greater Bangkok Metropolitan Area was submitted in 1968. But the Master Plan was not endorsed due to the high cost envisaged. Only a few elements of the plan were undertaken to reduce the most pressing needs. "Ibid. Christensen and Boon-long, 1994, "Institutional Problems in Thai Water Management: Challenges for New Legislation", 9. 199 towards decentralization. Setchell describes this pattern as "Rather than being like the relatively compact and dense city of 1960, then, Bangkok of today is rapidly suburbanizing".89 This has implications that there will be increased demand on urban services and public facilities in a more extended area; water supply and wastewater treatment services being one of the priorities. Li the process of development and growth, each sector has its own justifications which warrant its increased demands for its share in the water resources. The previous sections described each of the sectors in terms of its water requirements and the analysis reveals the following: 1) Agriculture is confirmed to be the sector requiring the highest amount of water within the BMR. At this point, the level of annual requirement in the sector is estimated at approximately 6.2 billion cubic meters. This accounts for approximately 73% of estimated total BMR water demand. The water supply for the sector consists of surface water as the major source of supply, allocated to the sector by the Royal Irrigation Department (RID) and minimal groundwater, extracted by the sector through wells registered under the Department of Mineral Resources (DMR). 2) The industrial sector's annual water requirement is estimated at 1 billion cubic meters. This stands at about 12% of the BMR's total water demand. The majority of the industrial sector's water supply is groundwater extracted through private wells, mostly not registered under the DMR. Only a minimal amount of piped water from the MWA is used in the industrial sector. A Setchell, 1991, "The Emerging Crisis in Bangkok: Thailand's Next 'Boom"', 9. 200 notable aspect of water usage by the industrial sector is the toxicity of its wastewater discharge which imposes stress on the water quality of the existing source of water supply. 3) Annual water requirements by the service sector is estimated at 618.18 million cubic meters, or 7% of total BMR's water demand. This is supplied almost equal in amount by MWA and DMR. In terms of water quality, the service sector also imposes strain on water bodies through its untreated wastewater discharge. 4) Residential water demand reached an estimate 575.85 million cubic meters per year which also adds up to about 7% of BMR's total water demand. MWA and PWA supply the majority of this amount through piped water services. The balance is the extraction of groundwater from wells registered under DMR. Sewage disposal by the residential sector has been estimated at 365 million cubic meters per year (1 million cubic meters per day) which further confirms that the above residential water demand estimate is reasonable since sewage disposal generally accounts for 80% of water use. The current lack of treatment facilities implies residential sewage also poses significant stress on water sources. 5) Although two other sectors account for a relatively smaller share of MWA's services, it should be noted that the government sector is recorded to have an annual water purchase volume of 101.26 and 98.59 million cubic meters in 1992 and 1993, respectively. During the same period, recorded water vendors' purchases were 1.57 and 1.37 million cubic meters, respectively. The government sector and water vendors' demand combined, therefore, accounts for about 1% of total BMR annual water demand, with private water vendors share being only about .02%. 201 Figure 5.9: Water Demand by Each Sector as a Percentage to BMR's Total. Government 98 MH.Cu.M. Resident 575 1.16% Water Vendor 1 Service 618 MH.Cu.M. Mil.Cu.M MH.Cu.M. 6.78% 0 0 2 % Agriculture 6.2 7 28% _ _ _ _ « _ BM.CU.M. ,^ _,„ 4 ^-—-^aMI^B^^^ifc^ 72.99% Industry 1 BH.Cu.M. 11.77% Also interesting to note is that MWA's water supply to the residential and service sector exceeding the amount of its RID quota of 660 million cubic meters is extracted groundwater not under the records of the DMR.90 Not considering the source of supply, overall water demand within the BMR is thus estimated to stand at the level of 8.5 billion cubic meters per year. 5.6 Projections of BMR's Future Water Demand: There have also been further projections of BMR's future requirements of water. This is generally based on the growth trend of each sector, and so far, projections indicate that all sectors will continue to increase their demand for water. See appendix. 202 While the industrial sector has emerged as the engine of growth for the economy, the service sector remains an essential source of foreign exchange earnings and labour absorption. Meanwhile the agricultural sector has not undergone any significant change in its production method and, in light of the favorable international trade condition, will unlikely do so in the near future. A 1991 UN study, on Assessment of Water Resources and Water Demand by User Sectors in Thailand, projected that if the demand for MWA water for domestic, commercial and industrial uses continue to grow at the annual rate of 8% as in 1980-1989 in the next 10 years, BMR's annual demand will be approximately 1.4 billion cubic meters by the year 2000.91 Projections by TDRI suggests, in 1990, that annual water demand in the BMR will grow at a higher rate than that projected by the UN. Figure 5.10: Real GDP Growth Rate in Each Sector of the BMR 1983-1990: Tingsanchali, 1990, "Assessment of Water Resources and Demand by User Sectors in Thailand", 54. 203 5.61 Projected Increase in Industrial Water Demand In terms of industrial water demand, TDRI found the significant variables that explain industrial water demand to be industrial output (manufacturing and construction) and price.92 Calculations indicate that the elasticity of industrial water demand with respect to industrial output is 0.61. With this elasticity of demand, TDRI further assumes an average annual growth rate of BMR's industrial sector at 9% and projects that the industrial sector's demand for piped water will have an annual growth rate of approximately 5.4% over the next decade. This rate will decline to 4.5% during the year 2000 to 2010 as the pace of growth is likely to decrease in a later stage of development.93 Figure 5.11: Conservative Estimates of Industrial Groundwater Demand and the Demand on MWA's Service when 95% of the Amount is to be Supplied by MWA. 1 2 Year Note: 1= The Year 2000, 2= The Year 2010 Source: Derived from information in Sethaputra et al., 1990. Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 62. Ibid., 63. 204 Even when assuming a conservative annual industrial water demand growth rate of 6% in the first decade, and 5.5% in the second decade, TDRI projects the demand for groundwater to reach 2 billion cubic meters per year by the year 2000 and 3.4 billion cubic meters per year by the year 2010. 5.62 Projected Increase in Service and Residential Water Demand As for service sector and residential water demand, TDRI found the important factors determining water demand in the BMR to be the price of water, the number of users or meter connections, per capita income, and the output from the service sector.94 Li the analysis, TDRI assumed the combined water demand of residential and service sector to represent BMR's total water demand due to the fact that the two sectors account for over 99% of MWA's recorded services. In terms of service sector water demand, TDRI estimates that at the growth rate of 7% per year of service output and service users, the level of annual water demand in the service sector will increase by 10%.95 In the case of residential water demand, TDRI estimates that at the growth rates of 5% in per capita income and 7% in number of residential users, residential water demand can be projected to grow at a rate of 9% per year. This may be a conservative estimate. The service sector in the study by Thailand Developement Research Institute (TDRI) is based on Metropolitan Waterworks Authority's (MWA) official record which includes public enterprises and government agencies. 95 Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 35. 205 Based on the above assumptions, water demand of the residential and service sector combined will more than double by the year 2000. Thus with approximately equal share of water demand between the two sectors, the residential and service sectors water requirement will add up to 1.6 billion cubic meters per year in 2000, and assuming a slightly lower annual growth rate of per capita income and service output in 2010, service sector and residential water demand will then be 3.5 billion cubic meters per year.96 TDRI suggested further that the estimate should also take into account the allowance for leakage or Non Revenue Water (NRW) of 30%. This would bring the total piped water requirement by the two sectors up to more than 2 billion cubic meters in the year 2000, and up to 4.6 billion cubic meters in the year 2010. 5.63 Implications from the Projected Increase in Water Demand; While industry is being encouraged to phase out the use of groundwater, the shift is estimated to create an additional demand for surface water of approximately 2 billion cubic meters per year by the year 2000, and 3.4 billion cubic meters per year by the year 2010.97 For MWA to supply 95% of this amount, MWA's system will be pushed to accommodate up to a total of 4 billion cubic meters by the year 2000 and 8 billion cubic meters by the year 2010.98 On the other hand, the agricultural sector in the BMR continues to compete with MWA for a share in the total surface water allocated by the RID to as high as 6.3 billion cubic meters per year. Sethaputra et al., 1990, "Water Shortages: Managing Demand to Expand Supply", 35. 97 Ibid., 63. 98 Ibid., 63 206 5.7 The Current Water Pricing System in Thailand: Water price in Thailand currently applies to only the services provided by the Metropolitan Waterworks Authority (MWA) and the Provincial Waterworks Authority (PWA). Although the Royal Irrigation Department (RID) is in charge of the overall allocation of surface water, it has never enforced any charge for its services. MWA as well as PWA are allocated a quota amount of water free of charge. In turn, the tariff which MWA and PWA impose on their customers only covers the cost of water production. The current water pricing of MWA is a progressive rate: the more water used per month, the higher the unit price charged." The charges are applied to three types of customers: 1) residential; 2) commercial, state enterprise and government agency; and 3) industrial. The current water price structure requires government subsidy to the general urban water users. As a public enterprise, MWA is expected to continue investing in the water supply system to serve demand in the BMR. However, unless water price is allowed to adjust according to the full cost of supply, the continued expansion of water demand will result in increased subsidy. MWA's attempt to restrain the alarming growth rate with a water conservation program, which imposes higher tariffs on high water consumers, has so far encountered resistance from the government. The debate to raise water price has generally focused on the hardship that such measure will place on the urban poor. However, when the facts reveal that it is the higher income level groups who are receiving the major part of the subsidy in their water See appendix. 207 use and that there is an option of low cost block pricing, the argument for the concern of the urban poor becomes less convincing. Estimated Benefits from Raising Water-Price: A study of the affect of raising water price by TDRI suggests that, to a certain extent, there is much to gain. The elasticities of demand indicate that a 10% increase in price will reduce water demand in the residential sector by 2.8%. In this case, TDRI used the estimated water consumption and price for 1990 as a base scenario. It is concluded that based on the price elasticities of demand and assuming water price increases from the effective rate of 6.2 baht per cubic meter per month to 9 baht per cubic meter per month, residential water demand declines by 13%. Therefore, a less than 50% increase in the effective price reduces the pressure on water supply by more than 50 million cubic meters and at the same time, more than 660 million baht of revenue is generated. As for the service sector, the elasticity of demand obtained by TDRI indicate that a 10% increase in price will reduce water demand in the service sector by 3.1%. Also with the same estimated increase in water price to 9 baht per cubic meter, the service sector water demand is projected to decline by 14%. The pressure on water supply would be reduced by more than 40% and an amount of more than 460 million baht of revenue is generated. Thus, with the two sectors combined, a less than 50% increase in price would reduce the pressure on water supply by as much as over 90 million cubic meters and at the same time, generate more than 1.1 billion baht of revenue. 208 Where Water-Pricing Stands in Thailand's Policy Arena: The issue of water price remains controversial for the BMR, despite its potential as a demand management measure to regulate people's water consumptive behavior. Pointed out in this chapter are the facts that while certain sectors of the economy are benefiting from the "boom", they are potentially being protected from the actual cost they are imposing on the water resource. Through government subsidies in the form of low water price and lack of strict regulations in waste discharge, certain sectors of the economy continue to benefit at the expense of other sectors, including health and other social support systems. The true situation of disparities between different groups in their access to urban water services and their level of water usage further suggest that the government's reluctance to raise water price under the concern for the urban poor may no longer be justifiable. In fact, The World Bank indicates that" Underlying these (water) problems is a vicious cycle of poor quality and unreliable services that result in consumers' unwillingness to pay, which, in turn, generates inadequate operating funds and a further deterioration in services". 10° While water pricing has come to receive attention among economists and academics as an important demand-management tool for encouraging more efficient use of water, the acceptance of such concepts among water-related agencies proves to be limited. This is confirmed by interviews conducted in November and December 1994 (see appendix). Easter etal., 1993, "Water Resources Management". 209 Water Agencies' Perception of Water-Pricing: Interviews of MWA and PWA representatives indicate that the concept of demand management is accepted and understood by both agency's officials. However, their perception towards applying water-pricing measures to achieve demand management objectives is a different story. MWA sees water-pricing as possibly being a factor that would encourage reduced water consumption or help adjust water consumptive patterns. However, it is clearly expressed that water-pricing will be the last alternative MWA will choose to resort to. On the other hand, PWA firmly stated that it does not believe in the principles of water-pricing as a measure for achieving demand management objectives. This is because in setting the water price at a certain level to adjust consumers' consumptive behavior, two variables are still seen to be the determinants of water use: basic needs and income. It was further elaborated by PWA that with an increase in water-price the basic level of water use would not change nor would the level of consumption in the higher income sector change. At the time of this interview MWA has already been granted the authority to set its water charges according to the MWA Act. However, PWA's water-price structure remains to be subject to the approval of the Cabinet (see appendix). More widely recognized as a political issue than an economic one, water pricing remains an unresolved alternative for Thailand. This is believed by many to be the result of the lack in property right specifications to water in the Thai system. The next chapter examines such 210 claims and further discusses the issue of property rights to water under the context of the related changes which have occurred within the Thai political economy. 211 CHAPTER 6: THE ISSUE OF PROPERTY RIGHTS IN RELATION TO THAILAND'S WATER MANAGEMENT SYSTEM Based on the Bangkok Metropolitan Region's (BMR) water demand profile, Thailand's water user groups may be broadly categorized into three groups: industry, agriculture, and residential consumers. Presently, the government assumes the role of the allocator through its regulations enforced by its civil servants. Past experience has shown the government's role to be ineffective and thus an alternative proposed by economists and the academic circles has been to use economic instruments such as water pricing, in determining allocation. Although such proposal sees water pricing as an efficient measure in that it allows the market mechanism to function properly and thus indirectly force rational users to conserve, it still assumes the role of the government as the major regulator. Therefore, the focus of solutions suggested is commonly on reforming the bureaucracy or institutional arrangements. One interesting issue that has recently been brought forth is that of property rights to water. The problem is claimed to be that water is treated as open-access in Thailand and unless property rights to water are clearly specified, water pricing could never be effectively applied. 6.1 The Issue of Property Rights: The issue of property rights for water raised by Christensen in the case of Thailand revolves around the concern of the tragedy of the commons and the government failure in providing a satisfactory alternative. However, Christensen's implications for property rights 212 specifications was mainly to provide a favorable institutional condition for a natural market to evolve. Christensen's argument was that the lack of property rights specifications and enforcements has resulted in a condition of market failure in water management which occurs in two forms: 1) the absence of a pricing mechanism for water; and 2) the production of negative externalities. This follows part of Coase's proposed approach to the problem of externalities because Coase identifies the problem of externalities as the absence of markets and the associated property rights.1 According to Coase once every asset is owned, all externalities would be internalized because "... the resolution of damage levels and payments would be organized through the valuation and enforcement of relevant property rights...determined either through the market or through the legal system".2 In other words, by assigning property rights to existing open access resources such as water, the problem of externalities would be resolved. However, further discussions in this thesis will indicate that speicification of property rights to water is more complicated than what Coase's theorem seems to imply. This is because Coase's idea of property rights strongly refers to individual rights to assets. But the physical characteristics of water suggests that exclusion for ownership at the individual level is not feasible because of the extremely high cost and demanding technology involved. 1 Helm and Pearce, 1990, "Assessment: Economic Policy Towards the Environment", 6. 2Ibid.,p.6. 213 6.2 Efforts to Specify Property Rights to Water in Thailand: Property rights over water resources has never been clearly defined by any of the Thai laws. The 1991 constitution only indicates that it is the responsibility of the State to upkeep the environment and the natural resources balance, to prevent and clean up pollution, and to conduct planning for appropriate land and water use. In other words, Thailand's water resources are managed under an open-access regime. While Thai citizens are entitled to use water for designated purposes, the State through the government is assigned the authority to administer water-related responsibilities. This perception is reflected in the Thai water management system whereby raw water is allocated by the government but those receiving the supply are not subject to any costs. Unless the water supplied involves pumping or has gone through the treatment process, such as the services provided by water agencies, consumers are not charged for operational costs. Over time the government has managed the water system to guarantee such an open-access regime and therefore has been expected to assume the responsibilities of providing the population with water supply free of charge. However, property rights to water have recently become a subject of concern in Thailand and two draft Water Codes, one by the National Research Council (NRC) and the other by the Law Faculty of Thammasat University have both addressed the issue of property rights to water. The NRC draft proposes retaining the regime of open access to water whereby the civil services through the civil law code assumes the authority to assign ownership and utilizations rights to the user groups they determine. As such, while during normal times every 214 Thai citizen is entitled to enjoy the use of water short of imposing any negative effects on other users, the civil service is authorized to declare a crisis and charge water users for their consumption volume during times of water shortage. On the other hand, the Thammasat draft proposes that water resources should be declared State Property. Citizens are thus to be granted utilization rights to water resources but not ownership rights. The right to use is to be administered by way of permits. Water uses other than residential use would be subject to a State permit which would be valid for a period of five years. Such a State permit would specify the water volume the permit holder is entitled to and where the water use is allowed. This also applies in the case of wastewater discharge. Both drafts allow for the transferability of water rights. In the NRC draft, transfer would be allowed during the period of crisis and when a water permit is issued. In the case of the Thammasat draft, transferability is allowed at all times for both water consumption and wastewater discharge. It appears that neither of the two drafts offers a form of ownership that could be realistically administered. The NRC version has not suggested any system beyond the current system of open-access, while the Thammasat version offers a system clearly beyond the administrative capacity of the government given the sophisticated information required to administer such a demanding permit system. 6.3 Thailand's Historical Development of Resource Ownership; The obstacles faced by the two draft water codes illustrate that the task of specifying property rights to water in the case of Thailand involves challenges beyond 215 simply devising legislative measures. Especially when considering that the forms of resource ownership adopted in a society are naturally determined by the combination of a society's legal development and its social and political-economic conditions, discussions about the issue of property rights specifications for water in Thailand require an understanding of the nature of Thai political economic development in terms of ownership of resources. In this respect, the pattern of political economic development which has caused changes in traditional Thai social relations and which has, in turn, affected the pattern of land ownership may have significant implications for explaining the situation of property rights to water in Thailand. Weak Legal Basis: Thai society has not been known to be a legally conformative one, as has often been observed that "... stiffened by Buddhism, (Thai society) is built on personal relationships, not on principles or laws...That is why law enforcement is not always effective in Thailand".3 In fact, Thai society is known to have particular difficulty in dealing with tragedies of the commons, mainly because the society is highly tolerant of individual economic choice and life-style.4 An important element which also contributes to this difficulty is believed to be the reason that "...during most of the country's history of land abundance and, in effect, unhindered settlement, resource depletion and environmental degradation appeared to be a positive-sum game".5 The resource endowments were able to 3Kulich and Wilson, 1992, "Thailand's Turn", 33. "Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 232. 5Ibid,p.232. 216 accommodate the effects generated by the transformations in Thai political economy soon after the break-down of the formal hierarchical sakdina system. However, as the speed of development increased over time, the demand on the once abundant resources have placed great stress on the resource allocation system which in the case of water resources, has undergone little if any reciprocal change since. Traditional Economic Production and Social Relations: Before the opening of the economy by the Bowring Treaty in 1855, the distribution of political power in Thai society was characterized by a delineated hierarchy of the sakdina system. At the micro level of social relations such as in Thai villages, reciprocity, redistribution and labour exchange among kin and neighbours was the norm. According to Douglass6, reciprocal relations characterizing Thai society occurred both symmetrically and asymmetrically. Symmetrically reciprocal relations occurred among equal status households and individuals in tasks of subsistence production, while asymmetrical reciprocal relations occurred between individuals of unequal status, representing the basis of the patron-client relations. Douglass described the reciprocity based on asymmetrical relations in traditional Thai society as "...historically characterized by a relatively strong bargaining position of those ostensibly in the subordinate 'client' position. Hierarchical relations were not in the main a function of unequal access to productive resources but arose from positions of rank aligned with redistributive institutions".7 Evidence has shown that water allocation in Thailand is traditionally a 6 Douglass, 1984, "Regional Integration on the Capitalist Periphery: The Central Plains of Thailand",. 7 Ibid., 66. 217 collective task undertaken by local institutions. Communities in many villages of Northern Thailand today manage their water allocations by their own local institutions which are typically governed by an irrigation chief known as gaefai. Therefore, res communis rights were not foreign to the traditional Thai resource allocation and management system. Production for Exchange: After the signing of the Bowring Treaty in 1855, Siam saw the decline of the sakdina system and subsequently the gradual shift to a more effective system of resource mobilization based on money taxes rather than labor and produce in kind. As a result, the number of free farmers increased significantly.8 But even with the abolishment of slavery and corvee, the availability of land had guaranteed the absence of landlessness. A notable aspect of the phenomenon of freely availabile land was that land rent was not an important element in agricultural production since land had no exchange value.9 The government's policy objective during this period was to encourage the expansion of rice production for export and thus measures were taken to encourage people to clear and cultivate new land. This suited well to the long tradition that Thai peasants could settle as much farm land as one could cultivate.10 It was not until the issuance of the Land Act of 1936 which reaffirmed free settlement rights that a limit of 50 rai was put on the amount of land that could be claimed.11 8Ingram,1955, as cited in Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 23. 9 Ibid., 24. 10Muscate, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 23. 11 Ingram, 1955, as cited in Muscat, 1994, "The Fifth Tiger: A Study of Thai Development Policy", 24. 218 Centralized Control by the State: However, notable consequences of the Bowring Treaty were the commercialization of the economy and subsequently the reorganization of the state into a highly centralized bureaucratic system. The system of relations based on reciprocity and redistribution which once integrated households in a Thai village was gradually replaced by a new hierarchy of administrative control from the central government. In other words, the growth in centralized control from the state had caused the deterioration of the territorial basis of social integration along with the institutions which supported it.12 Interestingly enough, the "...predilection to hierarchy and to a social system in which people group themselves in patron-client networks"13, remained embedded in Thai society and still dominated peoples' attitude in their relations with others, though not evident in a formal hierarchy as in the former sakdina system. But the bureaucratization of the state governance had affected the pattern of patron-client relations as in what Douglass observed to be the transformation from "...traditional territorially-based patron-client relations within the ruling class to functionally-organized patron-client relations managed within the centrally-controlled state ministries".14 King RamaV's reform effort to consolidate central control over previously loosely governed outlying regions had established a system of centralized governance of resource allocation which continues to characterize the Thai system to the present. Transformations resulting from Production for Exchange and Centralized State Control: Douglass, 1984, "Regional Integration on the Capitalist Periphery: The Central Plains of Thailand", 48. Muscat, 1994, "The Fifth Tiger: A study of Thai Development Policy", 23. 14 Ibid., 40. 219 The traditional system of collective efforts, a system based on res communis rights, was brought to a collapse as reciprocal relations and redistributive modes of exchange weakened. This is clearly observed by Douglas that "With the expansion of the market and functional division of state power, the strength of appeals to local institutions and local source of power diminished15...The provinces and villages were left without countervailing sources of political power or influence on resource allocation by the state16". Changes occurring from the result of the market economy and the centralized control by the state were nowhere more prevalent than in the Central Plain; as household crafts such as textile production and pottery were abandoned because the specialization in rice production directed towards export came to absorb labour, power, and land once used for growing other crops for self-sufficiency.17 It was evident in the Central Plain that the expansion of the market economy had resulted in the concentration of production and export of rice as a single commodity and parallel to this was the increase in manufactured imports. 6.31 Land Ownership: Implications for Water Resources Land ownership was not a source of accumulation in Thai society prior to the expansion of the market economy. However, when land registration became law through the flourishing market economy and the limits on the amount of land that a person could claim was abolished, the right to ownership beyond what a household used for production had attached an exchange value to land which became a major source of accumulation. 15Douglass, 1984, "Regional Integration on the Capitalist Periphery: The Central Plains of Thailand", 40. 16Ibid., 46. "Ibid. 220 Since then, land-use patterns in the Central Plain began to undergo rapid changes. Indebtedness, land loss, and tenancy became widespread as taxation, borrowing to risk production for the market, and the need to have cash for required transactions were part of the whole process in the production for monetary exchange.18 Labour exchange which traditionally integrated kin, neighbours, and village households were no longer viable as the situation of land loss and tenancy had left farmers with insufficient land to participate in labour exchange and therefore must become wage labours for larger landowners. Great landlords of this time were believed to be the outcome of the government's intention to provide a reliable supply of water to assist the expansion of rice production in the Central Plain. Douglass suggested that "...the great landlords were a product of government-promoted irrigation schemes which gave huge tracts of land to nobles willing to 'privately' finance the digging of simple distribution canals, many of which quickly silted up and had no capacity to store water".19 It had become clear that the sharing of productive resources among households through reciprocal exchange, traditionally characteristic of Thai society, was no longer a common practice. Only patron-client relations remained as one of the few continuing social relations in contemporary Thai society. However, it has changed in form and has become an unbalanced relationship described as " moving away from a broad basis in religious, social, cultural and economic relations to one based on economic relations and economic class divisions."20 No longer common were social relations with patrons kin, neighbours, '"Douglass, 1984, "Regional Integration on the Capitalist Periphery: The Central Plains of Thailand". 19 Ibid., 69. 20 Ibid., 91. 221 religious figures, village headmen or government officials, rather the new role of patrons were filled by landlords, town merchants, money-lenders, and creditors. The balance of bargaining power in this new network of patron-client relations shifted towards the patrons along with the loss in the protective nature of the relationship, and as the farmers came to lose their subsistence guarantees.21 Part of the government's attempt to encourage rice production for the market economy by removing the limits on the quantity of land ownership coupled with its neglect of any accompanying rural development scheme had brought about the conditions most clearly summarized by Dougless as "...the filling in of land frontiers, increasing demographic pressure on land with poorly developed irrigation systems, the need for credit in the commercialized economy, and the failure to repay loans". 22 The net result from these conditions were the increase in the transfer of land from the peasantry to commercial farmers and to landlords. Patron-client relations between landless farmers and landowners or creditors remained the alternative which farmers sought to secure their chance of production. But these new patron-client relations have placed the clients into a practically irretrievable position as they are in "...a spiral of decreasing social, political and economic power. Former expectations are no longer honoured; political power emanating from village solidarity has been fragmented and largely neutralized, and clients tend to assume more of the risks and less of the fruits of their labour".23 21 Douglass, 1984, "Regional Integration on the Capitalist Periphery: The Central Plains of Thailand". 22 Ibid., 86. 23 Ibid., 94. 222 One of the most important factors which has lead to the situation of landlessness and concentration of land-ownership thus has been "the institutionalization of economic exchange which has redefined land as an exchange commodity".24 Landlords created by state reforms and government-promoted irrigation schemes were no longer the group of people who themselves engaged in agriculture. Rather, they were absentee landlords who thrive on fixed rents whereby irrespective of how poorly or how well a tenant's production, the landlord gets his amount of rent. By 1978, up to 80% of the total land area in the provinces adjacent to Bangkok was reported to be in tenancy.25 Also consequential was that as farmers were forced to sell portions of their land to repay debts, land resources became fragmented under the ownership of those who were most likely incapable of increasing their amount of land holding. The loss of ownership over their productive resource - in this case land - together with the break down of the reciprocal relations and redistributive exchange - characteristic of their traditional institute of production - have had important implications. Farmers' control over their most significant production input, water, has been lost. Collective decision-making for resource allocative purposes had declined along with the dissolution of the reciprocal relations. Douglass's observation confirms that " was in the Central Plain where production for exchange most strongly dominated local allocation of resources and labour time and the presence of the Central State was strongest, leading to dramatic changes in land relations in reciprocal and redistributive exchange 24 Douglass, 1984, "Regional Integration on the Capitalist Periphery: The Central Plains of Thailand", 78. 25 Ibid. 223 relations, and in the capacity for local collective decision-making". Furthermore, the fragmentation of land holdings has made it difficult for the distribution of water to be equitable or efficient since the existing irrigation structure lacked proper feeder systems, it was the larger farmers in close proximity to the irrigation sites who were the main beneficiaries.27 On the other hand, migration to other rural areas or to Bangkok for seasonal or permanent wage work has become a pattern of response to the progress within the Central Plain. An important implication of such tranformations within the Central Plain is that the destruction of res communis rights by way of granting private ownership to land had brought about the loss in the traditional institutions which supported the principles of common property resources. With collective efforts no longer viable, water allocation which required efforts beyond the capacity of an individual to manage was then thrust under the control of the State. Today, irrigated agricultural lands of the Central Plain depend on irrigation systems constructed and maintained by the government. 6.32 Water Resources under the New Course of Development Before World War II, the transformations within the agricultural sector of the Central Plain had occurred without significant impact on other economic sectors. Ingram (1971) observed that "The Thai economy experienced economic changes without development".28 This implies that although there was rapid growth in trade and the 26 Douglass, 1984, "Regional Integration on the Capitalist Periphery: The Central Plains of Thailand", 48. 27 Warr, 1993, "Thailand's Economic Miracle", 45-46. 28 Ingram, 1971, as cited in Akira, 1989, "Capital Accumulation in Thailand 1855-1985", 1. 224 penetration of the money economy from the expansion of cultivated paddy fields for export, there was no improvement in productivity, no development of the manufacturing sector, nor were there marked changes in the industrial sector.29 It was not until the late 1950s that development in the manufacturing sector occurred, by the initiation of the government through the support of three groups: state and public enterprises including military-related firms; multinational enterprises; and Thai (ethnic Chinese) private business groups.30 State enterprises had as their economic base their strong stake within the infrastructure sector, wa