Transcript The policies and politics of industrial upgrading in

Chapter 10
The policies and politics of industrial upgrading in
Thailand during the Thaksin era
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Laurids S. Lauridsen
EC 482
Agenda
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 Introduction
 Industrial sectors – policies
 Industrial upgrading – knowledge based economy
 Institutional upgrading – public sector reform
 Industrial upgrading – political aspect
 Conclusion
Introduction
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 Thailand
Weak industrial infrastructure
 After 1997-1998 crisis, loose competitiveness with rising
QCD

 Studies show:
Relatively weak competitiveness
 Widening trade deficit due to over-reliance on imported
capital goods, intermediate goods and technology

Thailand - The Regional Laggard
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 Current intensity of R&D lags 1980’s Korea by
10-
15 years
> 4/5 of Thai enterprises didn’t conduct R&D
 > ¾ no innovation activities
 Low technology capabilities
 < ½ had design capabilities
 < 1/3 had abilities to conduct reverse engineering

 Intensive export industries  high import contents
The Thaksin Government
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 Development strategy
 Inward-looking
 Dual-Track Policy
 Expand export-led sector
 Boost domestic economy
 Modernization of the traditional bureaucratic culture
 Upgrading Policies
Industrial Upgrading
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 Strategic Industrial Policies
 Higher technology and higher value-added
 Focus: technological advance and organizational learning
 Improve product quality, productivity
 Intra-firm efforts
 Inter-firm knowledge spillovers
 Willingness to implement adequate and coherent policies
Effective Policy Making
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 Policy-makers:
 May lack knowledge of actual workings of private sector
 May prioritize issues concerning their political career
 Political elites’ preferences towards existing firms
 Implementation may fail since:
 Bureaucracy depends on support of political elites
 Little autonomy from business
 Insufficient connections with business sector
 Concentration on maximizing budgets
Factors Holding Back
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 Political structures and processes
 Unrealistic and seemingly ambitious politics
 Corruption
 The ‘will’ of state elites
Thaksin Policy on Industrial sectors
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 Injecting funds into SMEs
through Banks and some taxes cut
 Promoting 5 niche industries
 Giving chances to venture capitalists
 Create more employment
 More supportive than the Democrat party for Industrial
sectors
Pros
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 Increasing opportunity throughout
country
 Increasing the cash flow circulation
 Strengthen the already strong Industries
 SMEs “good time”
 Create concrete long term plan for Industries
Cons
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 Create more debts through failure of SMEs borrowers
 No precise framework to achieve better success
 Not equally distribute the funds
 Weak SMEs would never get
the real helping hand
Thai policies of industrial upgrading –
towards a knowledge based economy
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 Develop Thai to be knowledge-based
economy through
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the formation of a class of new innovative entrepreneur
Use of local wisdom
Development of Technology
science and technology
 promotion of information technology
 Information technology for modern
administration and management

Introducing policies aim of improving
Thailand innovation system
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 More specifically, to promote technology


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Intra-firm
Inter-firm
Extra firm
 Both initiatives indicated stronger focus on technology
upgrading and broader range of innovation activities in
policies making(inter firm)
For promotion of private sector technology
efforts(intra firm)
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 Conclude that Thailand’s system of incentives don’t focus
on enhancing basic engineering and design capabilities,
building knowledge networks between large and small
firms (intra firm)
 Two important change in Thaksin government
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National innovation agency, to promote innovation for
competitiveness.
BOI, investment promotion focus on long-term
competitiveness, tax exemption for skills, technology and
innovation in firms(intra firm)
Introducing policies aim of improving
Thailand innovation system
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 Strengthening of inter-firm knowledge flows
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Main policy focus, horizontal linkages and clustering
Vertically innovation related link is weak and limited
(no policy implemented)
 The extra-firm links to public research technology
organizations (RTOs)
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RTOs is weak in Thailand
RTO service were little used and were considered as
unimportant sources of innovation-relevant information
Most firms were below investment threshold.
Introducing policies aim of improving
Thailand innovation system
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 Evaluation, there were sign of more focused and strategic
approach in relation to RTOs
 However, this does not indicate that Thailand has development
to creating extra firm or for inter-firm linkages in term of
technological development
 A 2006 world bank study of the country’s technological
capabilities; Thailand have difficulties in tapping into
global knowledge and build technological capabilities in
cooperation with other firms or RTOs.
Human resources for industrial technology
development
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 Thaksin policy to transform Thailand into knowledge based
society by solving education problem
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Lack of coordination of fragmented education efforts
Highly centralized in Bangkok
Neglect of science and technology issues
Inadequate incentives to promote good teaching
Inadequate ICT and foreign language proficiency
Traditional teaching method
 Three areas of education reform were important for
upgrading; vocational education, skill development and
tertiary education

Due to the very slow pace of the educational reform , the action plan can
be implemented first is to develop this 3 areas to upgrading the
education
Summing up
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 Visionary industrial technology policies developed around
strategic industries and technology; stronger focus on
international competitiveness, policies more relevant to industry.
 Policy for private sector technology efforts was improve due to
the promotion policy
 On the other hand, lack of continuity in leadership led to delays
and some inconsistencies in formulation and implementation of
the human resource reforms
 Despite the success of Hard disk drive industry inter firm and
extra firm linkages generally remained weak point.
Institutional upgrading – public sector reform
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Bureaucratic reform programme

Public Sector Development Commission (PDC)

o
o
o
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The Public Sector Development Strategy (PSDS) 2003 - 07
Aimed at improving the quality of public services, right-size of
bureaucracy, increasing the competences, and promoting
good governance
Reforms to public management, restructuring of public
organization and public financial management
Results: minimizing functional duplication
Institutional upgrading – public sector reform
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 Public Affairs Management Plan (PAMP) 2005 – 08
 Required to develop four years and annual action plan
 The output-oriented budget system
(strategic – performance – based budgeting) in 2003
o
o
o
Partly implemented
Trouble devolution of financial management
The system remains inoperative
 Result: by April 2006, the Cabinet had not approved
the Budgetary Procedure Act
Institutional upgrading – public sector reform
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 The reform tried to integrate related government
policies, “ Management Clusters”
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The creation of One-Stop Service
Services Link Units (SLUs)
 Government Counter Services (GCSs)
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 The reform’s benefit
 Fixing Thailand’s slow-moving, inefficient, and corrupt
bureaucracy
 Showing stronger effort than previous governments
Industrial upgrading – political aspect
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 What is his dream?
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Country as a company by CEO Thaksin with strong,
large government
 Where did it come from?
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Inspired by Malaysian and Singaporean absolute power
government
 Why he need it?
Break the power of bureau and factions
 Push for more policies and easily get approval
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Industrial upgrading – political aspect
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 How to attain?
Populism to appeal rural and urban voters
 Bring many huge factions in TRT party
 Merge with other parties
When become the government
 Make it fast, easy, and centralised
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Make it fast and easy
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 Reform to have discretionary power over and take away
authority from minister and senior bureaucrats into his
hand
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Creation of six new ministries
 Allocate hugest amount ever to reserved central fund at PM
discretion power
 Not confined to parliament and intervene independent
organizations
Make it centralised
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 Divide and rule to undermine the power of factions
 Power is organized by Inner circle of close people in his
empire
 Centralized decision making
 Dynamic CEO management and provincial CEO
Drawbacks
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1.
Focus more on distributive politics to the poor
and his supporters rather than productive
development policy
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Use policies and discretionary power to benefit his
coalition’s interest
Service business - telecom, real estate, entertainment and
media, banking - benefit the most
Manufacturing sectors were less well placed
Convert the poor to SME, but not change socio economic
structure
Drawbacks
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2. Delay of implementations
3. Frequent rhetoric and
marketing
4. Less transparency
5. Many policies doesn’t make economic sense
In the end of Thaksin’s policies
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 The first Thai PM to serve in full term
 Centralization of political power in CEO’s hand
 Presented as Dynamic and effective leader “could get
things done” + for people benefit and cleaning up
“The evil”
Try to moving Thai state more
developmental direction
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 But…
 As internal linkages, competitiveness, industrial
technology development block higher value added in
industrialization
 Competitiveness from lower-wage countries and
innovators in first-tier NICs
 Such as China and India
SME
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 Promote small-scale entrepreneurs, capital injection
into province, OTOP
 Promote SMEs
 But… not enough non-financial support
 Long-term growth in specific policy took more time
CEO PM transforms Thai state to be his own
machine
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 Democracy as a tools rather than goal
 As focus on rural poor
 Well-prepared plans for selected industries and
technologies but less in productivity and upgrading
 Use his wealth to buy support Ex. Parliamentarians
avoiding fragmentation, duplication and poorly
coordination
The others factors of lacking in industrial
upgrading
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 Ensure that he or his team get some benefit from the
policies
 Administrative reform look like modern, efficient
and effective but to ensure his loyalty and politics
power
 Insufficient autonomy of above and below
bureaucracy
 Lack of institution that connect industrial sectors,
information provision
Conclusion
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 Unique opportunity to bring industrial forward and
more development direction
 More concerning with macro and micro level of
international competitiveness than previous
ministers
Conclusion
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 But too much selective promote the interest of his
own business and associations
 One party dominance support more conflict of
interest
 As challenged metropolitan interests and royal cycles
Exodus to London
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 Being homeless one