National Development Indexing

Dr Kriengsak Chareonwongsak
Senior Fellow, Harvard Kennedy School , Harvard University


Five years ago I proposed a new approach to national administration, recommending the establishment of a national development index by the government. The proposed index was to be a composite index built up from many indicators touching every aspect of national development. In order to reach a standard of national prosperity, the government should set clear national development targets; establish a national development index and indicators; and assign the responsibility for each indicator to specific government agencies.

Recently, the Thai Health Promotion Foundation proposed an idea similar to my own. The Foundation recommended that the government establish a new national development index calculated from the difference between GDP (representing the production of ldquo;goodsrdquo;) and aggregate private expenditures on ldquo;bads,rdquo; such as liquors and tobacco. Moreover, the Foundation planned to cooperate with the Organization for Economic Cooperation and Development (OECD) in the area of technical and knowledge assistance, and to invite Professor Joseph Stiglitz, the 2001 Nobel Laureate for Economics, to be both counselor and developer of this index.
I agree with the proposal to create a new national development index beside GDP because GDP is used to measure only economic growth, but not economic and social equality, ecological sustainability or human generosity.
However, should the government be willing to adopt this idea, I raise some topics that should be of concern, as follows:

The Expenditure on ldquo;badsrdquo; The government should study all aspects of the ldquo;badsrdquo;from which GDP will be subtracted as a result of their expenditure. Rather than consider the Foundationrsquo;s proposal just in terms of health aspects, the new index should also consider the ldquo;badsrdquo; from an ecological perspective, such as the cost of natural resource deterioration through herbicides and pesticides in monocrop production; the social aspect of increased stress due to rising unemployment and the crime rate; and such economic factors as public debt, NPLs, poverty and income inequality.
The abovementioned list gives some crucial considerations for the indexing process. The government need not subtract the expenditure of all ldquo;badsrdquo; from GDP, but should carefully select ldquo;badsrdquo; that will significantly hamper national progress, and not count them in again under the new assessment process.

The weight of indicators Some benefits to having a single index rather than many indicators is that it will be communicable to the public and will create government accountability. Since the new index will comprise of many indicators, the weight of each indicator must indicate the importance of each component indicator to the total index. However, I disagree with the idea that the government is the only party who can determine the weight of each indicator. On the other hand, the government should decrease government discretion, but promote more participation from every stakeholder in the country. Furthermore, each indicatorrsquo;s weight should be flexible according to the contextual dynamics.
Target Assignment To utilize the index as much as possible, the government should assign target responsibility for each single indicator to specific government agencies. Responsibility and commitment will ensure that the assessment method of each government agency is more scientific and, finally, able to propel national development more efficiently.

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2009-06-16