Posted: September 13th, 2017

POLICY ANALYSIS

POLICY ANALYSIS

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The four mandatory questions make a total of 100 points possible

Answer all four questions below in no more than 5 pages of a word document (single spaced, 1 inch margin, New Roman 12) as follows: Questions 1 (2 pages max), question

2 (1 page max), questions 3 and 4 (together 2 pages max).

PART ONE: POLICY ANALYSIS: MEMO WRITING, PROFESSIONAL ETHICS AND STRATEGIC TRIANGLE FRAMEWORK

With reference to the attached article “Thai Loan Project Benefits Villages But Create Rifts” (see attached):

You are an executive assistant to Suvit Khunkitti (the Education Minister), chairman of the Village Loan Project, who himself is a trusted long-term ally of Prime

Minister Thaksin Shinawatra. He calls you into his office, where he is carefully examining a recent front-page Asian Wall Street Journal article on the scheme (see

attached).

“The project is generating a lot of press,” he sighs, “and not all of it good. The Prime Minister wanted to have a fast-starting, popular and high-publicity project to

kick off his term with, but if it fails miserably then it could hurt rather than help him in the next elections. The stakes are high on this one for the Prime

Minister,” – and here he looks at you pointedly – “and for me personally”.

Suvit continued, “The Prime Minister has just asked me to brief him tomorrow (at a regularly scheduled Cabinet meeting) on why the scheme is not generating more

positive press, and how we should respond. Now, I know you aren’t an expert in microfinance – obviously, neither am I. But I’m interested in getting the views of

people broadly trained in public policy who haven’t been part of this so far, like you. So please have a ‘quick-and-dirty’ memo for me ready by the end of the day to

help me prepare for tomorrow’s Cabinet meeting.”

Question 1: Write a focused, brief memo that responds to Suvit’s request. Limit yourself to no more than the equivalent of two single-spaced typewritten page (about

1000 words MAX) (45 points).

Question 2: Suppose after you give your analysis to the Minister, he gets back to you and pushes you to revise your memo by downplaying the actual problems in the

scheme and focusing instead on a “press management” strategy to influence public opinion without substantially altering the scheme. “It’s what the Prime Minister wants

to hear from us,” he says. What would you consider as you weigh your response to this request? (15 points – one page MAX)

Thai Loan Project Benefits Villages But Creates Rifts
By Richard Borsuk and Montira Narkvichien
20 June 2002
The Asian Wall Street Journal

NONG BUA, Thailand — In this impoverished patch of northeast Thailand, Soonthorn Nankam is helping carry out one of the world’s biggest experiments in fiscal

stimulus.
Early this year, Mr. Soonthorn obtained a loan of about $470, financed by the Thai government, to upgrade his rudimentary motorcycle-repair shop. With that money, he

bought a new battery charger, tools and a cupboard full of parts. Mr. Soonthorn says his income has soared as a result.
Lert Honkravit, however, isn’t taking part in this experiment in mass lending. The farmer’s application for a loan in nearby Laonokchum village failed, and so he

couldn’t expand his mushroom crop. The experience has left him bitter and convinced that the committee in his village that decided who gets money is “biased against

the very poor.”
Across the rest of rural Thailand, an ambitious plan to put cash directly into the hands of villagers — the brainchild of Prime Minister Thaksin Shinawatra — is

creating a similar division among haves and have-nots.
With no pilot project nor partnership with development agencies, Mr. Thaksin set out to show that giving cash to the country’s 74,881 villages can get rural Thailand

“on its feet again,” spark a consumption boom and cut the country’s dependence on foreign investment as its growth engine. The idea: each village gets a million baht

($23,691) to lend out; borrowers are supposed to repay their local lending committee, with interest, to create a growing pool that others can tap later. Since late

last year, 59.3 billion baht has been lent out.
The stakes of the experiment are high for Mr. Thaksin and his populist bid to propel Thailand, where the Asian economic crisis began, to grow more by boosting domestic

demand than by luring foreign capital. It won’t be clear if the fund is a boon or boondoggle until next year, when the loans are due. But already, some criticize the

fund as an expensive ploy to boost Mr. Thaksin’s popularity at a time when Thailand is financially strapped.
Meanwhile, outsiders are watching to see if Thailand’s Village Development Fund might offer an alternative model for giving microcredits on a mass scale. So-called

microlending has drawn the attention of development experts in recent years, some of whom have argued that rural people, who often remain in poverty because they can’t

get affordable loans, make good credit risks. Grameen Bank in Bangladesh has drawn particular notice for its success in making microloans.
While Grameen has focused on making collective loans to groups of women whose income was below a poverty line, the Thai project makes loans to individuals. It also

imposes no maximum-income level for loan recipients. In fact, the Thai government has fixed only a few guidelines as to how the plan should be administered, and has

left the rest to villages.
That hands-off approach is unusual in a centralized political system where Bangkok has big clout, but it raises concerns about how well the aid is being used, and by

whom.
“Letting the people themselves manage is a good principle,” says Paiboon Wattanasiritham, a former Stock Exchange of Thailand president who runs a coalition of

nongovernment community groups. But untrained village managers, he adds, face “a large and complex set of issues.”
Village committees decide, for instance, what interest rates to charge on their loans, and how they are to be repaid — in one lump sum or in installments. Committee

members are free to extend loans to themselves, and even to award themselves bonuses for their work from interest earned on the loans they make. And in theory, they

will continue this activity indefinitely, because repaid loans and earned interest is then used to fund new loans down the road. The result is that, more or less

overnight, each village has become a finance company run by untrained financiers.
This lack of training worries even proponents of the program. “Villagers don’t have a clue about microeconomic administration,” says Anek Nakabutara, a member of the

fund’s national board, who criticizes government officials for starting the program without sufficient preparations.
Many villagers appear to be using their loans simply to repay costlier debt to moneylenders rather than to start or expand businesses. Most villagers can’t borrow from

banks and are often in debt to shopkeepers and other moneylenders, whose loans sometimes carry interest of more than 100% a year. Village committees generally charge

between 3% and 7.5% a year (Most microcredit projects charge more than 10%, saying it is essential to cover their costs and sustain the program.)
Helping rural Thai borrowers swap into cheaper loans isn’t economically productive, critics say, but the national guidelines allow it. “What you can’t do is borrow to

buy gold or a necklace,” says Supot Arevart, a member of the fund’s Bangkok secretariat. The Thai media have reported cases of borrowers buying motorbikes and cellular

phones.
Repayment is another issue. Around the world, microcredit programs often report very high repayment rates — but it can be hard for programs to sustain them. In

December, The Asian Wall Street Journal reported that default rates at Grameen Bank were about 10%, or double the rate the Bangladesh group stated on its Web site.
The Thai program hasn’t set a repayment target. Education Minister Suvit Khunkitti, the project chairman, contends the repayment rate will be “much, much higher” than

50%. Some Thai economists say they believe far fewer than half of borrowers will pay on time.
A key concern is that money isn’t reaching the “poorest of the poor” who didn’t get elected to committees and won’t be judged bankable. In Mr. Lert’s village, headman

Mai Dankammee says committee members “cut the big piece of cake for themselves.”
“Politically motivated massive microcredit schemes generally end up as disasters,” says David Gibbons, a Malaysia expert on microfinance. Politicians usually “aren’t

all that serious about repayment, and a lot of the loans are captured by local elites,” he adds.
On the other hand, this project appears to be successful in one respect. Villages have been given both money and authority to disburse it, rather than one or neither.

“We heard the name of past [aid] funds, but we never saw the money,” says Tongmuan Tanonghee, headman in Phue, about 450 kilometers northeast of Bangkok. Villages

account for most of the country’s 62 million people but only a tiny fraction of national wealth.
In the Thaksin program, villages get the money after electing a committee of nine to 15 adults that fixes the interest rate, sets the criteria borrowers should meet,

acts on loan applications and eventually collects repayments. Aspiring borrowers must say how they will use the money “productively” and name two guarantors. Loans of

as much as 20,000 baht require majority approval, while loans of between 20,000 baht and 50,000 baht need a village’s unanimous consent.
It isn’t clear what will happen to borrowers who can’t or don’t repay their loans, and their guarantors. Thai officials say they will take legal action against bad

borrowers, but others are doubtful the committees or the government can seriously chase debtors. Mr. Suwit, the education minister, says he is confident payments will

be on time as villagers are “very careful with their image.” But even in a village where the project is going smoothly — Nong Bua, where Mr. Soonthorn repairs

motorcycles — committee members say some borrowers will need more time to pay if bad weather hurts the extra crops they have planted.
The committee in Nong Bua, 10 kilometers from the provincial capital of Khon Kaen, gave loans with 3% interest to 76 people who met its criteria (which include being a

“good person in society”). Prasop Saengsutthi, a committee member and teacher, says she and most committee members didn’t seek money. Committee work is volunteer,

though Ms. Prasop says her group hopes to give itself a bonus from the interest when loans are paid.
Ms. Prasop says the committee can ensure borrowers generally use loans as promised. “I’m the checker,” she declares. “We’re in the same village. I can see if the extra

corn has been planted.”
At Mr. Soonthorn’s shop, new equipment bought with his 20,000 baht loan have allowed him to expand. The result is that more bikes come to him rather than ride into the

provincial capital. “Before, I earned about 100 baht a day, and now it’s 300,” Mr. Soonthorn says. Extra work means he sometimes hires one or two day laborers — thus

further spreading the loan’s economic benefits.
Other residents have used loans to buy pumps for irrigation, higher-quality cotton for weaving textiles and plastic containers for chili sauce previously sold in bags.

Ms. Prasop believes these ventures will generate enough demand so borrowers can repay. The project’s only weakness is the one-year payback, she says, which is too

short for some agricultural pursuits such as raising cows.
Things haven’t gone so well in Laonukchum, where Mr. Lert the farmer is angry and without a loan.
Friction inside the committee over who should get how much money meant meetings that lasted until midnight produced no decisions — except for the group’s unanimous

move to quit en masse. It took 45 days to elect a new committee. “Nobody wanted to be on it,” says the current treasurer, Sawai Wannoi. “These are hot seats.”
The new group eventually approved loans with 6% interest. Among the first group of families getting money were those of all 12 committee members — including Ms.

Sawai, whose family has businesses selling noodles, groceries and bottled cooking-gas. She borrowed 20,000 baht to buy two cows and a sprinkler to water mint leaves.
She says Mr. Lert didn’t get a loan because he didn’t comply with requirements to apply in writing and to have guarantors. Ms. Sawai shrugs off flak from Mr. Lert and

the headman, Mr. Mai. “Even when criticism is storming, I just ignore it,” she says.
In Bangkok, project chairman Mr. Suvit doesn’t let criticism alter his view that the fund is a “learning process” that is going well.
In Laonokchum, Ms. Sawai is less sanguine, despite being one of the fund’s beneficiaries. After the million baht came to her community, she says, “I see a better flow

of money and more unhappiness.”

PART TWO: INTEGRATING THEMES AND READINGS

Pick two articles from the contemporary press dealing with the same or broadly similar kind of “public policy problem” in different places (e.g. China vs. the US, or

Detroit vs. New York etc.), or even different times in the same place (e.g. community policing in New York in the 1980s vs. now). At the top of part two, list the full

citation of these articles and the hyperlink to their webpage.

Question 3 (20 points). For each case separately, briefly use a few key concepts (from the readings and/or lectures) to analyze one of the following themes: a) how the

problem definition/agenda setting dynamics are playing out in the case; or b) how stakeholder/interest group dynamics are playing out in the case. (Choose the same

theme to apply to both cases.) Good answers here will provide a cogent analysis of the issues (based on what we can infer from the each article), showing the value

added of the concepts introduced in class to that analysis. But note you are not expected to do further research on the issues beyond the articles themselves.

Question 4 (20 points). Summarize, perhaps in a table or a set of side-by-side bullet points or some other format of your choosing, similarities and differences (in

terms of the concepts you have presented) between the two cases (the two articles). What does the comparison suggest to you about the importance of context in

understanding the policy-making process?

Your answers to Questions 3 and 4 should not exceed 2 pages.

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