Suggestions for poverty reduction policy-making

Welfare card, also known as card for the poor, has already been launched and distributed. The cabinet is busy addressing its aftermaths: unreadiness and insufficiency of electronic data capture (EDC) machines; card welfare abuse (exchange of card for cash); and budget leakage to the subrogated poor.

Hence, before the database of low-income earners will be further utilized, the Knowledge Management and Communications Services division is honoured by Somchai Jitsuchon, PhD, research director of Inclusive Development division of TDRI, to express his views concerning the welfare card issues.

We would like to invite you to reconsider the project’s initial objectives from registration process to consideration for poverty reduction policy-making so as to find the best method to detect people in poverty and satisfy their needs without excessive loss of budget while the right target can be reached, life quality of the poor and the nation’s future improved.

Somchai Jitsuchon, PhD, research director of Inclusive Development division.


What are your opinions after welfare cards have been distributed and utilized?

Somchai: I remark flaws in design and implementation. The latter has become a big issue due to abuse of welfare card — which is definitely as speculated. This scheme is similar to the Food Stamp which was launched in the United States: it offered vouchers that could be exchanged for foods or goods.  At the end, as people preferred cash to card, they sold their cards to convenience stores in exchange for money. After having confiscated cards from subsidy recipients, these stores could utilize the confiscated welfare at any time.

Say, if a card is worth of 300 baht, it means a cardholder already has some money, but not in cash. The stores ,which taking part in the scheme, pay 200-250 baht to cardholders in exchange for welfare cards. The subsidised, impressed with quick cash, will buy things they really want. From this example, supplying cash is a better idea. As for Thong Fah store owners, obtaining a card worth of 300 baht in exchange for 200-or-250-baht expense means they can still make profit out of it.

This kind of problem is likely to happen, but can you really charge every store owner? Here is a flaw in the implementation process. This is a regular consequence of bestowing things instead of cash. If you give them coupons in exchange for products, this kind of transaction must surely occur.

Back to the flaw in scheme design, can poor people registration really function? Asking people to report themselves as being poor, like once done in the period of Thaksin’s cabinet, would cause the same problem: registrants not being in critical poverty come to report themselves as poor. The latest registration, allowing only applicants aged over 18, indicates that there are 14 million poor people.

This amount contradicts with the one from NESDB which indicates that there are approximately 4-5 million poor from all ages, estimated at 8% from the whole population. Hence, the number of 18+ poor people should be below 4-5 million.  Discrepancy of numbers shows that the budget might leak to close to 10 million people.

According to NESDB, a poor is defined as an individual whose revenue is under the poverty line. If we choose to create a new definition by lifting poverty line slightly higher, say, two multiple times; the amount of poor people will increase from 4-5 million to 8-9 million, which is still under 14 million.

Suspicious, the screening committee tried to re-screen people’s qualification until the number hit 11 million, which is still higher than 8-9 million. Thus, it is factual that there is a large number registered applicants who are not really in poverty.

This leads to a question that if we find this data eternally factual, further policies aiming to aid the poor will be based on this number. A problem will abruptly take place: people not being in poverty will receive benefits. This means budget leakage.

But a more serious problem is that there might probably be a great number of poor people remaining unregistered; and we don’t know the exact amount of them.

NESDB states that there are 4-5 million people whose revenues are below the poverty line. It is likely that not all of them were present during the registration process. If 10% of these poor did not register, then around 500 thousand people were missed due to lack of information; unavailability; fear of filling up forms, the exact number would never be finalized.

Thus, if you take this data as an undeniable fact, what about the absent poor who didn’t manage to come and they are likely to be in severe poverty. This group of people are already abandoned. The registration process can be done, but bear in mind that this procedure can cause two errors: the non-poor come to register while the poor do not.

If enacting supplementary measure(s) to address the issue of certain poor people remaining unregistered is crucial, is there any tool to find them? This issue has never been discussed at all. The thoroughness of this welfare card is indeed questionable.

Somchai Jitsuchon, PhD, research director of Inclusive Development division.

What is the best way to precisely detect the poor?

Somchai: Theoretically speaking, I suggest using expense information to determine poverty status. We could learn how purchasing behaviours’ of these 11 or 14 million people are; whether they spend 300 baht per meal at mall food court or dine at restaurant. Presumably. Such behaviour can indicate their authentic financial status. This can help re-screen registrants’ qualifications.

In some countries, they even contact credit card companies to acquire information about card users. First, any individual possessing a credit card can be suspected to be a non-poor. Second, in expense record, if a subsidy applicant buys something like a piano, his/her name should be eliminated.

In South Africa, they utilise this means in the screening process to eliminate registrants who are not in real poverty. To make it effective, the government might have to enact a law to gain access to detailed information of credit and debit users from banks and card companies so that we can check every applicant’s expense. This is something which can be done thanks to technological advance. Still, there are legislative procedures to pass. If this can be done, the screening process will be better. This is only a suggestion to prevent subrogation from the non-poor.

As for Thailand, we have policies of free electricity tariff, free non-ac buses. Academically speaking, they are regarded as self-targeting policies. We monitor behaviors, transform them to data, and use it to verify financial status of each applicant.

This policy has a defect, of course. To explain, a rich person already has a house, yet he/she rents an apartment or has a second house in which they rarely dwell. Owing to slight use of electricity in such and such accommodation, this rich person can automatically obtain free electricity tariff.

Talking about using non-ac bus or third-class train bogey. If you are rich, will you ever use that? Here is why goods and services can effectively screen and target people. Comparing to the registration, we even witnessed a PhD reporting himself as being poor. Hence, screening people by their own consumption behavior such as low use of electricity, bus and train, which are self-targeting services, is a much better approach than self-registration.

There are other ways to improve poverty targeting. In one of TDRI annual conferences, we demonstrated geographical targeting by utilizing satellite imagery of roofs to speculate whether these households are poor or not, and to estimate the number of poor people in small areas such as a district or even a village.

Despite not knowing their names, we still acquire rate of poverty in each district/village which leads to effective budget allocation to aid the poor. This tool facilitates spatial budget allocation, yet distribution of subsidy to the local remains a problem.

To make sure that subsidy does reach the target and be properly allocated, we need a mechanism to find the poor in the local scale. And VHVs (Village Health Volunteer), officers under Ministry of Public Health, are the best answer.

VHVs are local people who are assigned to help the Ministry of Public Health to monitor villagers: each is assigned to monitor 15 households at maximum to ensure that they know everyone thoroughly. Cooperating with them is, to my thought, a very efficient way to detect the poor.

If we ask VHVs whether this person is poor or not, they can tell us. We should make use of this advantage since they already are government officers and they can dutifully report the information. There was a means I once offered: you give a VHV the list of the registered low-income earners in his/her neighborhood and have the names verified by the VHV. By that, names of the registered non-poor could be deleted and those of unregistered poor could be added.

Compared to spending over billion baht hiring college students through the NSO, this idea is much more efficient and effective. Students did not intimately know the low-income earners. If they could lie once during the registration process, why wouldn’t they do it twice, to the students? These students might not be capable of detecting lies, but VHVs are. And the cost is much less.

Somchai Jitsuchon, PhD, research director of Inclusive Development division.

Why wouldn’t you be surprised seeing people exchange cards for cash at Thong Fah Store?

Somchai: When I was informed that card was going to be distributed instead of cash, I could foresee that there would be problems during the implementation process as people prefer the latter. Let’s say if I want to help you, I offer you two options: gift or cash; both of equivalent prices. If I give you the gift, you might not like it, or might not like it most. But if I give you cash, you can spend it buying what you really like.

Elementary economics courses say giving cash is much better than thing. Anyway, subsidy must reach the right target, if they are really poor and in lack of nutrients or clothes. When being subsidized, recipients tend to buy food and clothes and not to buy cigarettes first unless you give it to the wrong person, they might purchase liquors or tobaccos since their basic needs are already fulfilled.

So we have to go back to the start: finding the right person and giving him/her a little amount of money to help them get through tough time. If we give them too much money, they will not find solution by themselves.

Concerning limitation of welfare card use at Thong Fah store, this comes from the idea of not giving cash. When they give things, choices of places to shop are narrowed as card readers must be installed. That is why not every store in the country can provide service except Thong Fah store since they have to invest.

Let me give you extreme example why cash is better.  Consider poor people living in mountains who must spend 300 baht alone to get to the nearest Thong Fah store; the card becomes in vain. But if we give them money, they can spend it just right away without travelling to Thong Fah. As a card, its implementation process is a serious problem and costly to everyone.

What has obstructed making a policy that allows supplying money to the poor?

Somchai: Money giving is something that the Thai middle class dislike. They would cast doubt on why giving them money. They are suspicious that these subsidy recipients will stop working and solely spending money on tobaccos and liquors instead.  But if you ask an economist, giving cash is much better than objects. From global researches, only 1-2% of people receiving financial aid spend their money with all vices. That is just a few.

Governments often assume that they know what is best for the poor better than the poor themselves; they act like parents and look upon the subsidized as if they were innocent children. The rich presume they know what the poor desire and launch this-and-that products or services.

This is all an assumption. Not every poor people needs to use public commuter. For example, people in slums prefer working in their neighborhood to working elsewhere. Acting like know-it-all parents never benefices the poor.

So how the policies should be designed in order to help the poor and motivate them to step out of poverty?

Somchai: They have always wanted to step out of poverty. Let’s say if you give them money, they can make use out of it: those lacking nutrients, which are becoming rare in Thailand, can afford fully nutritious food. Once they get healthier; they could work better; they could earn more.

In case they have kids and want to send them to a nursery which may charge 10-baht daily fee. This will cost 300 baht per month. If they are truly poor, they cannot afford that; kids remain undeveloped. But if they have cash, they can send children to school since their early childhood; they would have chance to prosper. If children are well developed since infancy until 5 years old, they will grow up as quality adults. Does this save the poor? Of course, the next generation will not be in poverty anymore.

Are there any sample schemes or policies which address poverty by giving money?

Somchai: According to what I am studying, government provides grants to subsidize the care for poor children up to 3 years of age. My ongoing research is to study about changes and benefits that would happen with subsidized families. The study has not been completed yet, but there are certain aspects which I could evaluate: I find that this scheme really functions.

The good thing about this scheme is that it targets newborns. What should be improved is the registration and reimbursement process. It should be that when a baby is born, he/she is automatically eligible for the subsidy, and convenient means of payment fee established by assigning hospital officers to ask patients their bank account number so that grants will be transferred in the next month. This process is the easiest way to reduce the problem of the poor not being granted.

The current subsidy is 600 baht per month, provided for newborns to 3-year-old children. This is higher than the past one: 400 baht per month for newborn to 1-year-old children.

What I once proposed is to subsidize 600 baht per month for newborns up to 6-year-old children regardless of family’s poverty status. The whole scheme would cost only 0.2% of the entire national GDP.  I consider this to be cheap that we can create the country’s future with, yet the government still denies this offer.

Infants are the target which deserve subsidy: government spends 60–70 billion baht to subsidize elders whilst 1 – 2 billion for infants from low-income households. The size is totally different. Although children are future of the country, the government chooses not to support them but to subsidize the old instead only because they can vote. Besides, as time goes by, when birth rate dwindles, so will future budget for kids, while that for the elder will only soar.

Somchai Jitsuchon, PhD, research director of Inclusive Development division.

As the government has many policies to aid the poor: free electricity fee, welfare card or support fund for children, should all of this be interlinked?

Somchai: This issue was already discussed: when we merge all together, data from each scheme will overlap. However, we still need VHVs to verify eligibility of welfare recipients even on the merged data. If we manage to verify every registered individual, the finalized data could be used with any further schemes.

Apart from poverty reduction, can various aids scheme positively affect inequality which is a big issue in Thailand?

Somchai: If you can reduce poverty, you can slightly address inequality. The poor have better lives; the gaps become narrower. However, the budget of welfare card is only 40 billion baht, some part of the budget even leaked to the nonpoor; so it might be only 30 billion baht which could reach the poor. This is not much yet it can still help them.

But some conditions and benefits in the welfare card can actually widen inequality. Cardholders living in the suburban obtain less effective money in the card. This causes inequality between the poor living in the upcountry and in cities. The gaps between them get even wider after this policy is launched. To bring back equality, giving money is the solution.

What will be the indicator(s) of the scheme’s accomplishment? Should this scheme be employed as an economic stimulus?

Somchai: There must be a survey conducted on proper academic standard. Can the registration effectively detect poor people? Is this scheme really useful? Does it positively change their lives? This can be academically conducted within a couple years.

Talking about how much this policy can stimulate economy, let’s say if we want to buy some rice, and if you don’t possess a welfare card to shop at Thong Fah store, you have to buy it somewhere else. But if you have the card, you just have your credits in the card reduced in exchange for rice. You have your own money left and can spend it with something else while rice can still be sold at Thong Fah store. Sales rate of other consumer products will also be increased, this can be estimated approximately at 40 billion baht. Once money is circulated, economy will be stimulated.  Even you exchange card with cash; that can stimulate economy, too.

Economic stimulus doesn’t care whether your money is clean or not as long as it stirs economy.


What are your suggestions to those being in charge of welfare card?

Somchai: Never cease to improve the database and ensure that it is always updated and re-screened. Indeed, the current screening process is not adequate yet. You need to collaborate with Ministry of Social Development and Human Security and Ministry of Public Health to ask VHVs to assist in database improvement. Budget leakage to the non-poor is not a critical issue compared to it not reaching the real poor.

I think that welfare card is the initial step of data collection and I hope that quality of data will be continuously ameliorated. We may employ legal articles to help build Big Data so that our database will be better and ready for further uses; including giving money to the right people. Here is an advantage of tool advancement.

Note The original version of this article is in the following link: ‘จนไม่จด คนจดกลับไม่จน’ ช่องโหว่นโยบายบัตรสวัสดิการแห่งรัฐ สู่ข้อเสนอปรับปรุงช่วยเหลือคนจน : ดร.สมชัย จิตสุชน