Energy Access in Urban Slums: A case of Khon Kaen, Thailand; Asian Institute of Technology

The article discusses how accessible are modern forms of energy focusing on urban and peri-urban areas of Thailand, the energy consumption patterns and the total energy related expenditures in urban poor and peri urban areas. Secondly it discusses the impact of past and planned energy policies on the current energy situation.

The initial assessment study was primarily focused on Bangkok. In Bangkok and its suburbs electricity is distributed by a single utility, the Metropolitan Electricity Authority (MEA) and in the rest of the country the electricity is distributed by the Provincial Electricity Authority (PEA).” In year 2005, 87.5% of the population had access to grid electricity (DEDE, 2005). 99% of the registered households have electricity connection (AESIEAP, 2007)., Biomass accounts for 33% of the total household energy consumption in Thailand. 57.5% of the households cook with LPG while only 32.8% of households cook with traditional biomass (NSO, 2005b). Renewable energy had a share of 16.9% in the total primary energy supply in year 2004.” the Parliament Office recognises that modern energy sources represent only a small portion of energy consumed in poor areas due to higher cost and limited supply in rural areas.

The two main policies affecting the energy access for the urban poor are policies on household registration and electricity pricing. The household registration is required to apply for different services, including electricity. Majority of slum households do not meet requirements for household registration. According to survey almost 60% of households were not registered( based on Bangkok slums only).

Electricity Pricing Policy

The Metropolitan Electricity Authority provides reduced tariff for households consuming up to an average of 150kWh per month over a period of 3 months; otherwise the household faces the regular tariff. This scheme is only available to registered households. The electricity tariff increases at a higher level than an average income for both poor and non-poor.

House Registration Policy

In 1956 house registration was introduced in Thailand. Currently the house registration is required to access ant type of government services, ie. citizenship, healthcare, education, banking services and electricity connection. In the slums some dwellers do not have house registration which affects their access to the electricity. To overcome this problem, in 1995 the Thai government began to issue temporary registration numbers to those households who do not have permanent registration number. This allowed the households to apply for the legal connection to the electricity supply, however the initial deposit for the electric meter is higher for the temporary registered households. This policy substantially reduced the number of illegal connections (connection through the neighbor) in Thailand. In Bangkok slums 68% of households have a direct connection to the grid and 32% through their neighbors.

Deficits of formal urban land management and informal responses under rapid urban growth, an international perspective.

Note: This article is specifically about African cities but has interesting observations relevant to Thailand.

The central premise of this article is that informality is a response to poor public policy. In the case of Africa, urban land management was practical to European colonialisation, ‘centered on peripheral ports, with access routes to exploitable resources and later to environments deemed suitable for European settlement’. Because this system was not endogenous, post colonial African cities are ‘exploding cities in unexploding economies’. The residual policies, land use controls, regulations, and high standards have led to a slow pace of development and unaffordable housing.

The author lays out three types of urban land markets:

1. formal/official statutory
2. customary/indigenous, and
3. informal/unauthorized or non-statutory.

On can’t develop a piece of land unless his/her rights on that land are legally specified and protected. However, legalisation of ownership is time consuming, complex, cumbersome and expensive for two reasons: one is that mapping, title registration, surveying, etc. setups are poorly developed and the other is because it is within the interests of some individuals to reinforce the inefficiency of the status-quo. As a result “the ‘informality’ of urban land markets…is as much a commentary on the ineffectiveness of existing official land tenure and regulatory arrangements as it is on their growing irrelevance.”

( I think this is really interesting because it has implications for policy development: if you find informal systems, try to figure out which policy they are responding to!)

The author doesn’t exclude completely the need for public intervention in informal land systems. She says while informal markets are good at provision of low-income housing, one must overcome the externalities of development like: water pollution, sanitation/public health hazards, traffic congestion, encroachment of public/open space, etc. in severely dense and chaotic informal subdivisions. Question: how is this accounted for in the Baan Mankong program?

I don’t want to write an essay here so there are three other interesting things to note:

One is the emergence of SCRs(Substandard Commercial Residential Subdivisions) which are illegal commercial supplies of urban land which imitate formal urban layouts and provide rudimentary services like water, electricity, etc. These SCRs are officially permitted and have financial linkages to urban administration. While they provide low service levels, they are also incrementally phased and built as the income of the residents increases. “As observed in SCRs, developers proceed according to the occupation-building-servicing-planning sequence, a reverse of the formal procedure.”

Another interesting thing is an example from Egypt where another author (Zaghloul) identifies 3 phases of informal settlement growth (he says that slums in the same city of different characteristics are generally closer or further along the same chain of growth): starting, boom, and saturation stages. He says the city can intervene before the boom and provide infrastructure or buy land that will later be used for school, public spaces, or other services.

Finally, a quote which I think is super interesting on the merits and demerits of informal land systems: “Informal urbanization not only poses a major threat for the depletion of agricultural land, but also creates a substandard urban product that is plagued with environmental and social problem. Nevertheless, informal urbanization has exhibited singular merits: it responds to the shelter needs of, what the author calls the forgotten segment of the housing demand; it meets the demand of  expectations and affordability of many segments of the population; operated in a market context and manipulates existing market forces and avoids the market distortions of public subsidies and direct supply. The challenge for public policy, therefore is to transform the informal urbanization product into a decent urban space and to utilize the informal development process to respond to the needs of many segments of the population.”

Don’t know about this for sure but maybe the Baan Mankong urbanization product isn’t under enough scrutiny? There’s a lot going on in this article so it’s worth a read especially if you’re doing your dissertation on Africa. Also… SUPER IMPORTANT is that this article talks about policy in a very spatial way. There is section called “Impact of informal urbanization on the Cairo Urban Region space structure” that blows my mind in that it’s exactly how I have trouble thinking/writing but I feel like it’s the kind of thinking/writing that Camillo is trying to get us to do.

Financing City Building: The Bangkok Case (D. Webster)

Webster, Douglas. ‘Financing City-Building: The Bangkok Case’, April 2000. (http://iis-db.stanford.edu/pubs/11894/Webster.pdf) Accessed 10 January 2010

ABSTRACT

Bangkok ir typical of a class of cities in East Asia characterized by: diffuse ans poorly coordinated institutional responsibility for urban management, ineffective land use planning, limited local government powers and limited revenues and financial resources to cope with growth. Bangkok Metropolitan Administration’s (BMA) current population is 8 millions. Until the crisis of 1997 the city’s economy grew rapidly at an annualized rate of 17.2%. City’s economy began growing again in 1999. It is a middle income city.

The starting premises of the paer are: Network infrastructure is the prime driver shaping development in middle income mega-cities in East Asia, basic urban infrastructure and services should be put in place before urban areas are built-up, capital for city-building is typically scarce and should be allocated to highest priority urban infrastructure, it is desirable and appropriate to borrow for infrastructure but borrowing should reflect future ability to repay debt, a portion of the land value increases generated by public improvement should be captured by the public sector and good governance should incorporate equity, competitiveness and sustainability concerns as reflected in local preferences.

Typically no corporate entity is responsible for the planning and management in urban areas. There is little coordination and lack of communication between providers of city infrastructure and city services. The new population growth, investment and physical development is occuring outside the core city’s boundaries. There is a problem of asymmetry between technological and institutional development. Often the most inefficient systems are those that have existed as institutions for the longest period of time.

A few agencies have attempted to estimate future demands for capital to finance city-building processes through public infrastructure. With increasing decentralization, much of this is likely to be the responsibility of local government. BMA benefits, at present, from low population growth but the suburban provinces are growing faster.

City-building is primarly associated with three processes:

1. Building at the fringe of the city on green field on relatively low-density rural sites. This type of development can engender the lowest capital investment costs and permit the creation of efficient land use/activity patterns compared with already built-up areas.

2. Redevelopment of existing urban areas which does not require significant investment in capital facilities. Particular concern is large-scalerestructuring or development whether driven by public or private initiatives.

3. Infilling, because arterial roads are scarce, large undeveloped lots often exist in interstices between corridors. On the periphery, the private sector tends to develop property holdings along major infrastructure networks. In built-up areas, the city building process associated with smaller parcels of land and is manifest through in-filling, demolishing and rebuilding, and upgrading or reusing existing structures.

It is critical that networks are property planned. This is especially importatn where land use planning processes are very weak. In many East Asian cities the approach to city-building that prevails could be described as ¡infrastructure follows’ rathes than ‘infrastructure leads’. Infrastructure-led development can only be realized if horizontal coordination exists among service providers at the local (micro) urban area scale.

Literature in uban finance can be categorized in:

1. Analysis and recomendations on fiscal relationships. Important issues associated with decentralization include efficiency, equity, transparency, accountability and impact on macroeconomic policy.

2. Innovative urban financing mechanisms like concessions, privatisation of state, regional and local government enterprises and public-private partnerships to finance catalytic projects. It was seen as a panacea for mobilising capital to meet the investment needs of Asian cities but many sectors are unattractive for innovative finance. Private sector capital tends to be more interested in large cities.

3. Sectorial analysis is an important area for further development. Urban infrastructure is delivered and operated by sector-related agencies.

4. Financial management from local urban government. Smaller East Asian cities have limited capacity for financial planning. Analysis and recommentations from perspective of cities as evolving, interactive systems, requiring horizontally-coordinated city-building processes, appear to be in short supply.

BMA controls less than 10% of public facility/infrastructure investment within its territory. The efficiency of tax/user charge collection is very low and all expenditure comes from current revenues. It means that capital projects are often incrementally built. For example, a road may be constructed at the rate of only few kilometers each year. State enterprises deliver most public utility services in Bangkok and the precentage of expenditure on social services was declining until the onset of the economic crisis. International lenders as the Asian Development Bank (ADB), the World Bank and the Japan Bank for International Cooperation play a major role financing major urban infrastructure in Bangkok. The Bangkok Transit System (BTS) is a major achievement for BMA because its significant contribution in shaping the city improving the quality of life and because it illustrates the BMA’s potential financial leverage. Private developers essentialy dictate the urban development. No mechanism exists to plan subdivisions so the building process often results in superblocks with inaccessible ‘blind land’ in the interior.

No one seems to be in charge of the city. No one is coordinating capital investment to major networks that shape and ultimately constitute the skeleton of the Bangkok organism. Given these conditions it is amazing that Bangkok works as well as it does.

What is needed?

1. Privatise the key state enterprises serving the city.

2. BMA should fully participate in the land subdivision approval process to avoid superblock dynamics.

3. Land readjustment processes need to be implemented on a pilot basis redesignatind some land for key public uses.

4. BMA’s monthly meeting with stakeholders should be formalized to include investment needed to realize strategic objectives.

5. Minimize the need for borrowing the BMA should maximise local revenues through the effective implementation of user fees for services and through effective property taxation.

6. Future revenue streams should be forecast based on two or three scenarios.

7. Continue to explore and take advantage of innovative financing techniques like privatisation and public-private partnerships.

8. Initial planning is not detailed enough and has not involved stakeholders. They frequently cause delays in project implementation.

Lessons:

1. Emphasize coverage at appropriate unit cost, utilizing appropriate technology rather than at unit costs based on technologies which result in considerably less coverage.

2. In planning and budgeting capital facilities, develop some type of mechanism to prioritise and allocate capital. A coordinating body that has political power from citizens and national government is needed for the metropolitan area as a whole, to ensure that the highest priority capital needs attract investment.

3. Buy rights-of-way ahead of time. Land purchase could be used proactively to raise revenues and shape economically strategic areas.

4. Land readjustment needed to shape local areas on the urban fringe.

5. Local government should participate fully in the local subdivision processes, emphasising infrastructure networks.

6. Demand side management. If the demand for new infrastructure in some urban sectors can be slowed, capital can be reallocated.

7. Emphasise economic forecasting, revenue forecasting and the wise use of credit. Future revenue to repay loans used for capital spending on coty-building is basically the product of the existence of instruments to raise revenues, the willingness of urban residents to pay for city-building and public services and future urban household income corresponds with the competitiveness of the city.

8. Use decentralization processes to integrate city-building processes. Decentralization is good news in terms of allocating capital more rationally at the city level. The challenge will be to link private suppliers to guidance and regulatory mechanisms of local governments.

9. Institution-building.

Bangkok will require very large amounts of money to meet their backlog, current and future needs. Privatization of key utilities could result in efficiency gains and ‘user pays’ principles should be implemented. Other infrastructure will require direct government expenditure so responsible borrowing will be needed.

ACTORS

BMA, ADB, World Bank, Japan Bank for International Cooperation

Housing, the state and the market in Thailand: Enabling and enriching the private sector

Yap Kioe Sheng

Journal of Housing and the Built Environment 17: 33-47,2002.

Housing is not viewed as a high priority on the political agenda in Thailand.  The exception being between 1970’s and 1980’s  when NHA built low cost rental apartments.  During this period the government facilitated private sector housing development by allowing them to build at a low cost and intervened to keep interest rates low to encourage more people to buy property.

The lack of integrated housing policies by successive governments produced mixed results in terms of adequate housing for low income groups.  The paper focuses on the Bangkok Metropolitan Region (BMR) as this  is the largest and economically vital area in Thailand.

Bangkok Metropolitan Region is comprised of the Bangkok Metropolitan Area (BMA) and five provinces, Nakhon Pathom, Nonthaburi, Pathum Thani, Samut Prakan and Samut Sakhon.  The population of the area varies due to the overspill from BMA into surrounding provinces which are highly urbanised and rural areas.  Furthermore many of the residents of BMR officially live in other regions as they have not transferred their housing registration to BMK.  From 1980 to 2000 the population growth has been estimated at 3 million, starting at 7 million in 1980 to 10 million in 2000.

There has been a steady increase of housing units in the BMR, from 1980 0.97 million units to 2.65 units by 2000.  The paper describes 3 main stages of housing production in BMR over a 2 decade period.

1 From 1980 to  1985 – Slow growth in housing stock averaging 3% per annum. This equates to an increase of 29,357 units

2 From 1986 to 1996 – Rapid growth in housing stock averaging 10.6% per annum. This equates to an increase of 120,978 units

3 From 1997 to 2000 – Slow growth due to financial crisis in 1997 averaging 2.3% per annum. This equates to an increase of 83,893        units.

There were a total of 1,677,864 by the end of 2000.  The housing stock tripled over the 20 year period and the population grew by 40% for the same period.  This boom mirrored the economy of Thailand which began in 1986 through until 1997.

The figures for housing production do not include that of informal housing sector.  In 1985 1020 slums and squatter settlements were recorded and the estimated population was around 1.2 million.  These figures have remained fairly constant over time unlike the formal sector. It has been said that the increase in low cost housing production is responsible for reducing the number of slum dwellers.

There was an increase in evictions during the period of economic boom as a result of increased land prices and the demand for land, however firm conclusions cannot be drawn as to whether slum dwellers moved into other informal settlements or onto the formal sector. The effect of the financial crisis of 1997 was of increased urban poverty; many people who became unemployed moved into slum areas, however there are no surveys giving concrete figures for this.

The increase in private sector developer- built housing resulted in a decline in the number of self-built housing in the formal and informal sectors.

In comparison to the housing production by private developers, the state produced very little housing (NHA),  it was given that the state was not required to intervene in housing production as sufficient housing was being provided by the private sector.

The National Housing Authority

The Housing Bureau and the Housing Division (Public Welfare Department), the Community Improvement Office and the Government Housing Bank were responsible for housing up until 1973,  during this period there were very limited housing policies in place.  From 1973 following a period of shortage in housing the above state agencies and the development portion of the Government Housing Bank merged to form the National Housing Authority of  Thailand (NHA).

Responsibilites included:-

Building homes for people

Conducting urban community development to clear slums and resettle those affected from clearing process

Providing dwellings and estates for rent, sale and hire-purchase and management of these properties as well as subsidies to tenants and buyers.

1973 saw the end of  a long period of  military dictatorship.  Successive governments were more liberal and  focused on the social welfare of the population.  Although established under the military regime the NHA carried out most of its planning after the rule ended. This was cut short by a military coup in 1976 and saw a period of military-bureaucratic rule until 1987.

NHA – plans

1974-1983 – plan to construct 170,000 housing units, dependant on govt subsidies.  Plan was cancelled in1978 after 36,868 units were built due to the financial burden on the government.

1976 – 1980 – revised plan reduced target units to 120,000, this was also cancelled  due to reliance on state subsidy

1979-1982 – Accelerated plan, replaced the previous and (influenced by World Bank) focused on improvement of 26,000 slum dwellings and development of 14,400 plots in 2 sites- and – service schemes.

1982-1986 – 5 year plan – could not be realised

1984-1986 – 3 year plan replaced the previous.

Each plan failed due to the lack of funding required or through being rejected by the government.  By the mid 80’s all the NHA direct construction plans were abandoned in favour of slum improvement sites-and-services schemes.

Collaboration with private developers started the construction of middle-income housing construction, the profits were to be used to support low-income housing.

3 main problems faced by the NHA

– Ineffectiveness of  its policy of direct construction – units were small and only accomodated 10% of the 1 million slum dwellers. Many disliked the units despite the inner city location and heavily subsidised rents. Many sold their occupancy rights and returned to slums

– Inability to improve slums and squatter areas – many slums and squatter settlements were located on private land and therefore it was impossible for NHA to implement upgrading programmes on this land.

– Difficulty in securing adequate land – complicated anti-corruption state regulations made it a very arduous process and difficult to compete with private sector for land..

The Government Housing Bank

Established in 1953, given status of state enterprise.  Inexperience led to bad loans and a crisis in the early 80’s.

1982 – the bank was reorganised by the Ministry of Finance, although the bank remained a state enterprise it was able to operate on a commercial basis.  The GHB was able to offer reduced interest rates and force commercial banks to lower their home mortgage loans, creating improved housing affordability in the country.  Demand increased, which in turn allowed private sector developers to produce lower-cost housing and an increase in the development of the housing sector.

The Private Sector

6 Periods of Private Sector  housing development

1957 – 1967 – land developers divided and developed vacant plots and then sold onto middle-income families

1967 -1973 – Housing project developers.  Projects became popular due to availabilty of loans and good economy.  3 types of housing developers; land development companies, professional housing developers, building contractors.

1973-1976 – Decline in housing development.  Governement issued Land Subdivision Act to control developers but standards were high and developers were discouraged from taking on projects. Oil crisis further discouraged developers, house prices plummeted

1976-1979 – Housing development projects increased again

1980-1982 – second oil crisis, increase in interest rates saw decline in housing demand and therefore in  development

Mid 1980’s saw an increasing middle class, the demand for housing grew once again. GHB was able to provide loans to homebuyers and private developers to support the demand.

Developers, politicians and bankers

As the ease with which developers could access loans increased, the number of loans increased and the government urged banks to be more selective in giving out loans for housing development.  However many government ministers were closely connected to commercial banks and the real estate sector and relied on them for financial support and so the ministers were not heavily enforcing strict control.

The repayment of the loans was dependent on the properties being sold and so the real estate developers and commercial banks agreed on a package deal to provide low interest loans to customers purchasing one of their own financed properties. Some banks had their own real estate departments and so they were able to control the entire process from build to sale.  Despite government intervening with stricter controls, the banks were able to continue dealings through their own established finance companies which were not as heavily monitored.

Throughout the early 90’s the demand for housing was kept artificially high, many purchases were speculative.  It was not a sign that people were moving out of slums and into formal housing as first thought.

By the middle of the 90’s there was an apparent oversupply of housing.  GHB found 350,000 vacant housing units in BMR many low cost condominiums.  Many developers were unable to sell their units and so defaulted on their loan repayments.

Urban Community Development Office

Economic growth may have seen many people enter the formal housing market but the financial crisis led many into urban poverty.

In 1992 the government  approved the Urban Poor Development Project with a budget of 50million USD.  The NHA issued a regulation for the establishment of the UCDO to implement the project under its jurisdiction.

The UCDO’s objective “is to strengthen, through credit provision, the capacity of slum dwellers and the urban poor to obtain increased and secure income and appropriate housing with secure rights and an improved environment.

1999 the UCDO and the Rural Development Fund merged to form the Community Organisation Development Institute (CODI).

 

Actors: The State, Private sector developers, National Housing Authority (NHA), Government Housing Bank (GHB),  Bangkok International Banking Facility (BIBF), Bangkok Land, The Ministry of Finance, Bank of Thailand, New Aspiration Party (NAP), Financial Institutions Development Fund (FIDF), Urban Committee Development Office (UCDO), , Housing Policy Sub-committee of the National Economic and Social Development Board, Rural Development fund, Community Organisation Development Insitute (CODI)

Key Words: Developers, housing, policy, poverty, public sector, Thailand, finance, government