The 4th International Conference

on

Public Management in the 21st Century:

Opportunities and Challenges

第四屆 21世紀的公共管理：機遇與挑戰

國際學術研討會

Whe n P r i nc i pa l H o l ds the Uppe r

H and: Case Studi e s o f Autonomous

P ubl i c O r gani za t i on i n Tha i l and

Prakorn Siriprakob

(Chulalongkorn University)

22/10 – 23/10/2010

Macau, China 中國 澳門

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Thailand

When Principal Holds the Upper Hand: Case Studies of Autonomous Public Organization in Thailand

Prakorn Siriprakob, Ph.D. Lecturer, Department of Public Administration, Faculty of Political Science,

Chulalongkorn University Mailing Address: Department of Public Administration, Faculty of Political Science,

Chulalongkorn University Henri-Dunant Rd., Pathumwan District Bangkok 10330 Thailand

Telephone: 662+218-7207 Mobile: 6681+442-6450

Fax numbers 662+255-2154, E-mail address: prakorn.s@chula.ac.th

Logistic Support Needed: Slide Projector

Paper prepared to present at The Fourth International Conference on “Public Management in 21st Century: Opportunities and Challenges,” Macau, China,

October 22-23, 2010

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Abstract

The Autonomous Public Organization (APO) is a new form of public

organization in Thailand that is popularly used to transform public organizations that

are not profit-oriented to a more flexible and efficient organization by granting this

type of organization more autonomy and flexibility so that they can better perform in

a more effective manner. It is known internationally in the name of Quasi Non-

governmental Organization (Quango). The APO is based on the agencification idea

that is commonly used in developed countries, such as France’s Etablissement Public,

New Zealand’s Crown Entities, and British Executive Agencies etc. The APO hinges

on decentralization of functions and bases it idea on the New Public Management

(NPM), and Good Governance principles recommended by international

organizations, such as the World Bank, and the International Monetary Fund (IMF) in

order to help resolve the Thai economic crisis of 1997. Important theories

underpinning the NPM are the public choice theory and the principal agent theory. I

have argued in my previous paper (Siriprakob, 2010) that two out of three

Autonomous Public Organizations (APO) studied are not only agents but also

principals since the Public Organization Act of 2542 B.E. granted them much more

autonomy and flexibility to exercise power as they see appropriate. As a result, those

two agencies seem to place the interest of an agent ahead of the interest of the

principal by developing better benefits and well-being of organizations ahead of the

efficiency and effectiveness of organizations. In this paper, the research has explored

one of the three APOs previously studied that appears to be different than those

above-mentioned two APOs largely due to its leader. This is because if the principal

holds an upper hand; he/she will be able to control benefits provided to organizational

employees at an appropriate level as well as some management issues within the

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organization in order to increase effectiveness. For an organization to be able to do

this, it must have a very strong leader at its helm. However, Thai cultures still

influence the APOs to a large extent. Even though the leader can control the provided

benefits, he/she still has more difficult issues to deal with due to patron-client

relationships and the culture of deference. Those issues are performance evaluation

within the organization and regulation enforcement on other agencies that this APO

evaluates. In addition, agency funds are still the lingering problem due to the lack of

transparency and accountability. However, the usefulness of the finding has suggested

that having a good leader is extremely crucial, this is because a leader can at times;

direct an organization to behave the way he/she desires. The bottom line: decreasing

spending, which is one of the most important requirements in the NPM and Good

Governance principles, will be achieved to some extent and this would definitely be a

good place to start.

Keywords: New Public Management, Quango, Autonomous Public Organization,

Governance

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When Principal Holds the Upper Hand: Case Studies of Autonomous Public

Organization in Thailand

Prakorn Siriprakob

Introduction

Given the current state of uncertainty governing social, economic, and

political conditions, the traditional form of organization reflected in Weber’s Ideal

Type Bureaucracy (1958) (which emphasizes consistency through strict rules and

regulations) seem outdated because it is too inflexible to deal with an unstable

environment. Instead, the notion that another model is better suited for an ever-

changing world seems best reflected in the models described in Burns and Stalkers’

“mechanistic” and “organic” organizations (1961). For them, the “mechanistic

organization” is similar to the Ideal Type Bureaucracy of Weber (1958). While Burns

and Stalkers’ mechanistic organization (1961) seems better suited to deal with stable

environments, the “organic organization,” according to them, fits better with an

unstable environment. As a result, Quasi Non-government Organization (Quango) is

an attempt to turn bureaucracy, which is labeled as a “mechanistic organization,” into

an organic organization so that it can better deal with the unstable conditions created

by fluctuating conditions in social, economic, and politics dynamics.

Pursuant to the recommendations of leading international organizations such

as the World Bank, the International Monetary Fund (IMF), the Asian Development

Bank (ADB), and the United Nations Development Programme (UNDP), Thailand’s

Public Organization Act of 2542 B.E. (1999 C.E.) created the Autonomous Public

Organization (APO). APO is how Quango is called in Thailand. The recommendation

to create APOs arose from these organizations’ belief that the main reason Thailand

faced the hardships it did during the Asian economic crisis of 1997 was because of a

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lack of good governance. The remedy to avoiding this, according to them, lies in

decentralization. In essence, creating APOs is considered decentralization by function.

The creation of local government, in comparison, is considered decentralization by

area.

Another recommendation to resolve the economic crisis is to implement New

Public Management (NPM) concept as well as good governance principles in public

agencies. Pursuant to the recommendation, Thailand has applied those principles. For

example, the creation of the Office of the Public Sector Development Commission

(OPDC) aims to inject efficiency into public service by forcing public agencies to

create key performance indicators (KPI) that will measure achievement of stated

results. Moreover, OPDC has implemented several techniques employed in private

sectors, such as outsourcing work, downsizing, improving customer service,

decentralizing, etc. The OPDC also has the function of monitoring the APO.

It is common for developing countries to increase efficiency and effectiveness

in public service by creating an organization like the APO after implementing an

initial round of reform, which typically places an emphasis on putting market

mechanisms to work (Bresser Pereira, 1999 as cited in Peters, 2001). Unlike other

public organizations that are centralized under a “unitary administrative system,” the

APO is decentralized through “multiple administrative systems” (Bowornwathana,

2006).

The Public Sector Reform Plan of 2540-2544 B.E. is the starting point of the

creation of the APO and was enacted because the government felt the need to have a

third sector of organization that is more flexible and burdened with less regulation to

perform at least some functions that traditional bureaucracy and state-owned

enterprises do not perform well. This type of agency should be easily established

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through simply invoking the Royal Decree, which means it does not have to go

through the legislative process as other types of agencies must. Through the Plan, the

government also aimed to protect administrators from political interference by

ensuring more job security for them so that they can perform at their full capability

(Vejjajiva, 2000).

What countries’ Quango ideas was Thailand’s APO modeled after? The

answer is the French model and the Anglo-Saxon model. The primary characteristic

of France’s Etablissement Public is reflected in Thailand’s APO because the APO

does not perform core government functions, while the secondary characteristics that

mark the Anglo-Saxon model, such as that of New Zealand’s Crown Entities and

Britain’s Executive Agencies, is employed because the APO has its own authority

(Bowornwathana, 2004).

This third sector type of organization in Thailand can be divided into three

different eras as shown in table 1.

Table 1: The Evolution of Third Sector Type of Organization in Thailand

Era Timeframe Numbers of

Organization

Law Important Issues

1 1932-1989 12 Some Acts and Royal Decrees

- APOs are placed in the same category with

state-owned enterprise and thus have to share the same budget,

personnel, and evaluation system.

2 1990-1998 27 Some Acts and

Royal Decrees

- Status and regulations

are unclear over whether they are eligible for the

same benefits as state-owned enterprises.

3 1999-present Additional 29 APOs

Public Organization Act of 2542 (B.E)

- Clearer classification, status and regulations

issues than those found in the first two eras.

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- Executive board has a lot of freedom to manage APOs freely; as

a result, APOs seem to have too much

discretion over regulations and benefits

Source: Summarized from Nitikraipot 1999 and 2000; Sawaengsak, 2006

Research Questions

This research posts the following questions:

1. What are the differences between public agencies and Autonomous Public

Organization (APOs) in terms of efficiency and effectiveness of organizations?

2. Has the flexibility given to APOs accommodated or hindered their efficiency

and effectiveness?

3. Do traditional values and cultures of Thailand have an effect on the

performance of APOs?

Literature Review

APOs are mainly created under the assumption set by the New Public

Management (NPM) concept mentioned above. Hood (1991) has posted seven

characteristics of an NPM as follows: (1) each individual is accountable for his or her

actions; (2) key performance indicators (KPI) should be used to measure results; (3)

emphasis on results not processes; (4) decentralization of power from the central

government should be encouraged to create more flexibility (5) more competitive

environments in public organizations should be fostered; (6) successful private sector

management and techniques should be emphasized in public organizations; and (7) to

caution should be exercised with respect to budget spending.

NPM is a concept underpinned by the public choice theory and the principal

agent theory.

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The public choice theory offers the idea that human beings are essentially self-

interested individuals. They are rational and they will select the most efficient option

if enough information is provided (Ostrom and Ostrom, 1971). This means that

human-beings will do whatever they want in order to pursue their own goal rather

than organization’s goals. The principal agent theory, in contrast, introduces the idea

of a contract agreement between a principal and an agent. The principal usually does

not have enough information about the agent; therefore, the agent will act upon his or

her own self-interest and will not disclose information fully to the principal. As a

result, agents might not work as hard as they are supposed to do due to the fact that

agents’ goals are totally different from the principal’s (Mahoney, 2005; Perrow, 1986;

Steinemann et. al., 2005; Weimer & Vining, 2005). In my previous paper (Siriprakob,

2010), I have claimed that when an agent becomes a principal, three events will

possibly occur (1) the principal will use their flexibility to benefit their organization

and officials, (2) the principal will not strictly evaluate their organization and officials

based on their performance as it is designed to be, and (3) NPM and good governance

principles acted by principal will be pretty much in doubt

Contrary to the above-mentioned assumptions, I contend in this paper that it is

not always necessary for a principal to act upon his or her self-interest to indulge an

agent and appease that agent in the above-mentioned scenarios. This is because if the

leader of an organization assumes the role as a principal who holds an upper hand,

he/she will then able to contain all of the above-mentioned three events under his or

her control and produce the following events instead:

Assumption 1: When a principal holds the upper hand, the principal is likely to

contain the benefits of the organization’s officials at the reasonable rate.

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Assumption 2: When a principal holds the upper hand, the principal is likely to

strengthen the level of performance evaluation of its officials at a satisfactory rate.

Assumption 3: When a principal holds the upper hand, NPM and good governance

principles will likely be better enforced.

However, when I have gathered additional in-depth information, I have found

out that Thai culture still has a tremendous effect on APO policy implementation.

Therefore, I have proposed two additional assumptions as follows:

Assumption 4: Even though a principal holds the upper hand, Thai culture still has an

effect on policy implementation enacted by the principal.

Assumption 5: Even though a principal holds the upper hand, agency funds are still a

lingering problem in APOs

Approaches on Values and Cultures That Influence Thai Bureaucracy

The influence of Thai culture and values on the behavior of Thai bureaucrats

has been mentioned by several famous scholars (Bowornwathana, 2007; Morell and

Samudavanija, 1981; Riggs, 1964; Siffin, 1966).

Riggs’ formalism (1966) referred to the idea that formal written rules are not

practically followed, but the old traditional Thai cultures are. Bowornwathana (2007)

indicates that even though the merit principles are supposed to be heavily practiced

after administrative reform, “spoils principles” still pretty much intervene in that

administrative system. Morell and Samudavanija (1981) discuss the value of

deference (greng jai) in the sense that a patron (boss) has to take care of his/her client

(subordinates) and vice versa in terms of a benefits-exchange concept within an

organization. This seems to go along well with Siffin’s concept of “personalism”

(1966), which refers to an idea that personal relationship is considered more important

than formal rules and regulations. Taken together, these above-mentioned values and

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cultures have somewhat obstructed and distorted the policy implementation of APO

as the findings will later show.

Transformational Leadership

Transformational leadership was the most influential leadership concept in the

United States during 1980’s and 1990’s (Linstead, et. al, 2009). According to this

concept, it can be summarized that importance is given to a leader who is able to

create a vision, make radical change, communicate that vision with his/her

subordinates, promote innovations, motivate and inspire his/her subordinates to

realize their full potential. At the end, all of these will lead an organization to achieve

a greater result. To better understand transformational leadership, it should be

compared to the concept of transactional leadership that marked former periods in that

the leader is not an initiator, but rather a person who supports, directs, and

coordinates his/her subordinates to achieve organizational goals. He/she therefore is

resistant to change (Daft, 2010; Gibson et. al., 2009, Linstead, et. al. 2009). The

reason I have used the idea of transformation leadership in this paper, because I

believe that Organization Sathorn director has possessed transformational leadership

quality through his visions, and inspire those visions to his subordinates and bringing

them to actions.

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Conceptual Framework

Research Methodology

Yin’s case study method (1989) is employed in this study, because it is the

only methodology that allows a researcher to use multiple techniques, such as

interview, participant observation, archival records, etc. to collect data. As a result, a

semi-structured interview process (Berg, 2009) is used to interview key informants.

Semi-structured interview is an interview technique that allows a researcher to adjust

their questions as they see fit if additional information is obtained during an interview

process. Thirteen key informants from three APOs studied, such as directors,

executive board members, and APO officials in significant positions were interviewed.

Public Organization Act of 2542 B.E.

Studied APO Royal Decrees

Good Governance Royal Decree

Studied APO Executive Board Members

Studied APO Directors (Principal)

Administrative Policies

Personnel Policies

Evaluation Policies

APO Officials

(Agents)

Economic Crisis of 1997

Mandates from International Organizations

- Globalization

- New Public Management

- Good Governance

Traditional Thai Values

and Cultures

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The interviews were taken place during August 2009 through January 2010. In order

to keep our promise to key informants not to reveal their identities, this research has

decided to use the famous street names of Bangkok, Thailand, such as Organization

Silom, Organization Sukhumvit, and Organization Sathorn, to replace the real name

of the APOs studied. Regarding archival records, Acts, Royal Decrees, annual reports,

and related documents were collected and analyzed through content analysis. Content

analysis is a study of communication among humans through several types of archival

records (Babbie, 2008).

The Difference between Traditional Bureaucracy and APOs

Table 2: The Difference between APOs and Traditional Bureaucracy

Traditional Bureaucracy APO

Autonomy Less More

Rules and Regulations Strictly procedural control More flexible

Budget Strictly procedural control Executive Board’s Discretion

Procurement Procedure Strictly procedural control More flexible

Employment Mainly permanent

employment

- Contract

- Outsource - Part-time employment

Salary Low Approximately 20-30

percent more than that of bureaucracy

Benefits Excellent with life-time monthly retirement

pension

some are excellent and some are market-priced,

and no life-time monthly retirement pension

Source: Compared by author

Even though there are three organizations studied in this paper, the research

will concentrate on Organization Sathorn, because of the three organizations it is most

able to dictate policy implementation, especially on the matter of benefit provisions.

Organization Sathorn’s duties include evaluate other organizations’ performances. As

a result, government activities performed by Organization Sathorn should have more

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autonomy and flexibility, because the role of “an auditor” is supposed to be free of

political influence.

One of the issues that APOs enjoy more flexibility than traditional

bureaucracy does is in budget allocations. “The budget that we have is supposed to

employ only 64 officials, but we end up employing 80 officials,” said the president.

Thus, with this flexibility, Organization Sathorn can spend its budget as they see fit.

This concept fits with the structural contingency theory in the sense that contingency

factors, such as internal and external environment, helps determine the organizational

structure (Tompkins, 2005). Flexibility thus allows this APO to better structure its

organization structure as it sees fit. This would be better than having only one type of

organizational structure, as a traditional bureaucracy must deal with.

In the case of the difference between APO and other type of public

organizations, one of the Organization Sathorn officials said that “I do not see the

difference between APO and a private company that I used to work for. The only

small difference that I see is we have to be more cautious about rules and regulation.”

She also thinks that time spent on procurement procedure is no different from the

private sector. She also emphasizes that APO is known for “Bureaucratic heart, but

private sector work.”

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Assumption 1: When a principal holds the upper hand, the principal is likely to

contain the benefits of their officials at the reasonable rate.

Table 3: The Comparison of Officials’ Benefits of Three APOs Studied

Organization

Sukhumvit

(Thai Baht per

annum)

Organization

Silom

(Thai Baht per

annum)

Organization

Sathorn

(Thai Baht per

annum)

Medical Coverage 100% for public

hospital; 50% for private

hospital

Group Health

Insurance (up to 20,000 to buy

medical coverage) (additional 20,000 can be reimbursed)

Group Health

Insurance (up to 8,000 to buy

medical coverage)

Spouse’s Medical

Coverage

100% for public

hospital; 50% for private

hospital

10,000 limit

Not included

Parent’s Medical

Coverage

100% for public hospital; 50% for private

hospital (no more than 100,000 per

year)

10,000 limit

Not included

Children’s

Medical Coverage

100% for public hospital; 50% for private

hospital

10,000 limit (first three children)

Not included

Children’s Tuition

Fee (kindergarten

to undergraduate

level)

9,000 to 20,000

9,000 to 20,000 (first three

children)

Not included

Dental Coverage 100% for public

hospital; 50% for private hospital

5,000 4,000

One-time

Retirement

Pension

Final monthly

salary x 10 (work continuously no

less than ten years)

Final monthly

salary x number of years worked (no

maximum)

Final monthly

salary x number of years worked

(maximum of ten years)

Fitness Center

Benefit

No No Yes

Source: Complied by author. As of September 17, 2010, 30.95 Thai Baht is equivalent to 1 US dollar.

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The majority of APOs that I have studied usually shows signs of putting self-

interest in front of the agency’s interest, which I have explained by using principal

agent theory. By looking at table 3, both Organization Sukhumvit and Organization

Silom officials enjoy a tremendous amount of benefits provided by their organizations,

because the benefits are essentially equivalent to that of officials in the traditional

bureaucracy, despite the fact that the implementation of contracted APO officials is to

remove costly benefits, such as parent’s medical coverage, spousal medical coverage,

and offspring’s tuition fee and medical coverage etc. in order to trim budgets and

create better financial disciplines. Yet these two organizations provide those above-

mentioned benefits.

On the other hand, the benefits of Organization Sathorn are somewhat more

reasonable. For example, medical coverage does not include coverage for spouses,

parents, and children. APO is designed to prevent its director and executive board

members from receiving the same benefits as their employees. This is to protect them

from taking advantage of the system by providing themselves excellent benefits. As a

result, the director is separately provided with a salary plus an extra thirty percent to

purchase his/her own health insurance and additional benefits. However, it turns out

that Organization Silom and Organization Sukhumvit officials still receive excellent

benefits. On the positive side, organizations with excellent benefits would definitely

entice competent people to work for the organization and retain excellent officials

with organizations for a long haul (Daft, 2010; Gibson et. al., 2009). However,

providing too much benefit would cost organizations in terms of budget spending in a

long run. On the negative side, excellent benefit provision is somewhat a benefit

exchange between superior and subordinate. This is because high ranking public

officials rely on junior public officials for their expertise, while junior public officials

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rely on high ranking public officials regarding their career advancement

(Bowornwathana, 1999). As a result, excellent benefits provided by their superior to

their subordinate are a form of reward that superior has for subordinate. The concept

that can also be used to explain this behavior is what Morell and Samudavanija (1981)

called “deference (greng jai)” syndrome.

“A man is reluctant to criticize his boss, friend, father, or prime minister. In return, the superior is responsible for taking care of the subordinate in various

ways, protecting his interests through paternalistic reciprocity” (Morell & Samudavanija, 1981, p. 28.).

In the case of officials’ dismissal, Organization Sathorn has dismissed some

non-performing officials, which is one function an APO is supposed to achieve more

quickly than the traditional bureaucracy. Yet Organization Sathorn has a few cases

pending before the Administrative Court because some of its former employees have

filed lawsuits against the agency because they felt that their dismissals were

inappropriate. “It is OK, I can defend myself. This agency is the APO, not the

bureaucracy one.” The president thus references the business-minded approach that

the APO is supposed to take in dismissing officials if their performances fail to meet

target levels.

Assumption 2: When a principal holds the upper hand, the principal is likely to

strengthen the level of performance evaluation of its officials at a satisfactory rate.

Organization Sathorn’s duties of evaluating other agencies force it to serve as

an example of accountability and transparency for other agencies to follow. As a

result, the agency has consciously engaged in a process of self-assessment by a third

party. As a result, Organization Sathorn is evaluated twice a year, and it publishes a

report annually. By the same token, each institution that has been evaluated by

Organization Sathorn is also required to publish an annual report regarding their

operations and make it available to the public. However, not many institutions act

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accordingly. Some institutions only report once every five years, because that is about

the time that Organization Sathorn is about to evaluate them.

For the case of individual evaluation, once starts working at Organization

Sathorn, there is a probation period of six months and it can be extended two more

times. Then, the contract will be renewed in the first phase for three years and every

five year afterward. During the year, there are two evaluations (every six month). The

first evaluation weighs 25 percent and the second evaluation weighs 75 percent. Each

APO official needs to receive at least evaluation score of 75 percent or more to

receive a “good” grade that will result to raises and bonuses. Organization Sathorn has

spent approximately 3.5 million Thai baht (approximately 112,900 US dollars) on

rewards alone. An evaluation score between 65 to 74 percent is considered an

“average” grade. An average grade will result in no raised and no bonuses and if any

officials receive an average grade for two years in a row, he/she will be dismissed.

Finally, an evaluation score lower than 65 percent is considered a “poor” grade, and it

will result to the immediate dismissal.

Assumption 3: When a principal holds the upper hand, NPM and good governance

principles will likely be better enforced.

Organization Sathorn believes in private business experience; executive board

members are appointed based on their proven successful records in private companies.

According to the president: “We avoid appointing retired government officials,

because we want quality, not compromise” The president believes that appointing

former bureaucrats to the post will likely result in a compromised culture that can lead

to inefficient operation.

With respect to executive board meetings, the director of Organization Sathorn

is extremely serious about meeting attendance. He wants all executive board members

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present at the board meeting and takes measures to emphasize attendance. For

example, he wrote a memo to the permanent secretary of the ministry (positional

appointment) that he/she is needed to be present at the executive board meeting or

he/she has to appoint a vice permanent secretary to attend the meeting (only one of

the two could attend.).

At this point in time, the president’s tenure is about to be finished, because this

is his second term (and there is a term limit of two, four-year terms). The organization

is performing a national search now. “I am the acting director, but I am still working

full-time. Other acting directors in bureaucracy do not work as hard,” he said in

emphasizing yet another difference between APOs and bureaucracy.

The director also indicated his son’s desire to work at this agency, but he told

his son to wait until his tenure at the agency is finished. “I do not want people to think

that my son can work here because of me. At the same time, I cannot prevent him

from working here based on the fact that he is my son.”

Recently, organizations subject to evaluation by Organization Sathorn have

expressed disagreement with the disclosure of their findings, which found that these

organizations did not excel in meeting their goals. “This is an excuse, they already

reviewed the results and defended their institutions, they already admitted the result

before we released to the public.” said the director of Organization Sathorn.

Assumption 4: Even though a principal holds the upper hand, Thai culture still has an

effect on policy implementation enacted by the principal.

The reason I claim that NPM and good governance principles “will likely be

better enforced” instead of “will be enforced effectively,” is because there are many

factors that contribute to the obstruction of NPM and good governance that prevent it

from working at full strength.

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“Thailand is a compromised society. Thai culture does not like to be scrutinized. They do not like to be evaluated. As a result, most Thai agencies

have a culture of e-ap (concealed information behavior), they do not want anyone to know anything about them,” said the president.

This sentence has been confirmed by the fact that stricter standards, such as

evaluation and certification, are not implemented. According to the president: “We

have to soften the criteria from evaluation to assessment and from certification to just

only evaluation.” This shows that it is extremely difficult for the government to fully

implement effective methods for evaluation because Thai culture obstructs it from

happening.

Even the director at times exhibits the influence of Thai culture. Recently, he

delayed release of evaluation results of institutions that graded below standard until

the “right time,” because he did not want the result to effect the people’s decisions

about those institutions. “Even though we like to have a good relationship with our

partners, we like to have a good relationship with the system more, because it is more

important” He said.

Regarding APO official’s evaluation, one official said “even though the

individual evaluation looks strenuous, it is not really like that. If some officials really

fail an evaluation, some extension will be granted.” This seems to go along with greng

jai concept mentioned earlier.

Assumption 5: Even though a principal holds the upper hand, Agency funds are still a

lingering problem concealed by APOs.

APOs are supposed to be non-profit entities; however, there are ways in which

they can earn extra revenues. Each APO studied seems to have alternate methods of

generating revenue, such as Organization Silom’s provided training programs and

Organization Sukhumvit’s charge of admission fees. For Organization Sathorn, extra

income is earned through their expertise in evaluation services and training programs.

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This income falls into the category of agency funds. Agency funds are income earned

by APOs that can be used at their own discretion under the authority of the Treasury

Reserve Act of 2491 B.E. (Suwanmala et. al., 2009) Additionally, clause 14 in Public

Organization Act of 2542 C.E. does not require the APOs to disclose those incomes to

the Ministry of Finance. Organization Sathorn has been employed by several public

agencies, such as the OPDC and the Office of the National Research Council of

Thailand etc. to perform evaluations of them. However, when APOs are not required

to report this income to the Ministry of Finance, it raises a question regarding

transparency and accountability posited by good governance principles.

Recommendations

The reason I have named this article when principal holds the upper hand is

because the director of Organization Sathorn by far provided the most reasonable

benefits compared to the other two organizations studied; as a result, I have

recommended the following recommendations:

1. It would be a good idea for an APO’s executive board to hire a director who

has had experience in the private sector, because the culture of business practice is

totally different from that of the public sector and because he/she will be more

cautious about budget spending, especially when it comes to benefit provisions. From

table 4, we can see that Organization Sathorn has provided less benefits compared to

that of the traditional bureaucracy.

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Table 4: The Comparison of Benefits between Bureaucrats and APO Officials

Benefits of Bureaucrats in

Traditional Bureaucratic

Agencies

Benefits of Organization

Sathorn

(Thai Baht per annum)

Medical Coverage 100 percent for public hospital Group Health Insurance

(up to 8,000 to buy the medical coverage)

Spouse’s Medical

Coverage

100 percent for public hospital Not Included

Parents’ Medical

Coverage

100 percent for public hospital Not included

Children’s

Medical Coverage

100 percent for public hospital Not included

Dental Insurance Included Not included

Lifetime Monthly

Retirement

Pension

Final monthly salary x number of years worked / 50

Not included

One-time

Retirement

Pension

Final monthly salary x number of years worked (no maximum)

Final monthly salary x number of years worked (maximum of ten years)

Source: Complied by author. As of September 17, 2010, 30.95 Thai Baht is equivalent to 1 US dollar.

2. The OPDC needs to set up a standard to control benefits provided to APO

officials to meet the market-price standard rather than allowing each APO to provide

them freely. To this end, APOs should hire a consultancy company to survey the

benefits of their private company counterparts. I strongly believe that none of the

private companies provide benefits such as parent’s medical coverage and children’s

tuition fee etc. This way they will be able to eliminate some costly benefits that NPM

tries to get rid of from the beginning.

3. Even though Organization Sathorn has answered several questions

regarding benefits provision, it is still not able to answer the “agency funds” question.

Agency funds are still the lingering problem for APOs. In the case of Organization

Sathorn, there is one entity that earns extra income. Organization Sathorn does not

have to report this fund to the Ministry of Finance; therefore, they can exercise this

funding as they see appropriate. To put principal agent theory to work at full strength,

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the government (principal) should force all APOs (agents) to report these agency

funds to the Ministry of Finance in order to increase transparency and address

accountability issues posited by good governance principles.

Conclusion

The APO experience in Thailand is still at an early stage, and the government

still has time to find the right formula to put it to work. However, leadership seems to

play an important role in structuring benefit provisions for APOs as well as policy

implementation. The leader at Organization Sathorn has set a good example that

shows that hiring a director who has had experience in the private sector seems to

help allocate benefits at a reasonable rate and puts a result-oriented culture to work at

full speed. Public choice theory and principal agent theory are still extremely

beneficial in identifying problems existing in APOs, such as agency funds etc.

However, to fully better understand official behaviors in APOs, Thai culture is

extremely crucial to help explaining the phenomenon occurred in APOs.

Acknowledgement: The author would like to thank Thailand Democracy Watch

(TDW) at the Faculty of Political Science, Chulalongkorn University Bangkok

Thailand, who is the main sponsor of this project.

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