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Chapter 10 The policies and politics of industrial upgrading in Thailand during the Thaksin era. Laurids S. Lauridsen EC 482. Agenda. Introduction Industrial sectors – policies Industrial upgrading – knowledge based economy Institutional upgrading – public sector reform - PowerPoint PPT Presentation
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Chapter 10The policies and politics of industrial
upgrading in Thailand during the Thaksin era
Laurids S. Lauridsen
EC 482
1
Agenda
IntroductionIndustrial sectors – policiesIndustrial upgrading – knowledge based
economy Institutional upgrading – public sector reformIndustrial upgrading – political aspectConclusion
2
Introduction
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
3
Thailand - The Regional Laggard
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
4
The Thaksin Government
Development strategy Inward-looking
Dual-Track Policy Expand export-led sector Boost domestic economy
Modernization of the traditional bureaucratic culture
Upgrading Policies
5
Industrial Upgrading
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
6
Effective Policy Making
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
7
Factors Holding Back
Political structures and processes
Unrealistic and seemingly ambitious politics Corruption
The ‘will’ of state elites
8
Thaksin Policy on Industrial sectors
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
9
Pros
Increasing opportunity throughout country
Increasing the cash flow circulation
Strengthen the already strong Industries
SMEs “good time”
Create concrete long term plan for Industries
10
Cons
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
11
Thai policies of industrial upgrading – towards a knowledge based economy
Develop Thai to be knowledge-based economy through 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
12
Introducing policies aim of improving Thailand innovation system
More specifically, to promote technology 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)
13
For promotion of private sector technology efforts(intra firm)
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 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)
14
Introducing policies aim of improving Thailand innovation system
Strengthening of inter-firm knowledge flows 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) 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.
15
Introducing policies aim of improving Thailand innovation system
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.
16
Human resources for industrial technology development
Thaksin policy to transform Thailand into knowledge based society by solving education problem 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
17
Summing up
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.
18
Institutional upgrading – public sector reform
Bureaucratic reform programme Public Sector Development Commission (PDC)
o The Public Sector Development Strategy (PSDS) 2003 - 07
o Aimed at improving the quality of public services, right-size of bureaucracy, increasing the competences, and promoting good governance
o Reforms to public management, restructuring of public organization and public financial management
Results: minimizing functional duplication
19
Institutional upgrading – public sector reform
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 2003o Partly implementedo Trouble devolution of financial management o The system remains inoperative
Result: by April 2006, the Cabinet had not approved the Budgetary Procedure Act
20
Institutional upgrading – public sector reform
The reform tried to integrate related government policies, “ Management Clusters” The creation of One-Stop Service
Services Link Units (SLUs) Government Counter Services (GCSs)
The reform’s benefit Fixing Thailand’s slow-moving, inefficient, and corrupt
bureaucracy Showing stronger effort than previous governments
21
Industrial upgrading – political aspect
What is his dream? Country as a company by CEO Thaksin with
strong, large government
Where did it come from? 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
22
How to attain? Populism to appeal rural and urban voters Bring many huge factions in TRT party Merge with other partiesWhen become the government Make it fast, easy, and centralised
Industrial upgrading – political aspect23
Make it fast and easy
Reform to have discretionary power over and take away authority from minister and senior bureaucrats into his hand 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
24
Make it centralised
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
25
Drawbacks
1. Focus more on distributive politics to the poor and his supporters rather than productive development policy
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
26
Drawbacks
2. Delay of implementations
3. Frequent rhetoric and marketing
4. Less transparency
5. Many policies doesn’t make economic sense
27
In the end of Thaksin’s policies
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”
28
Try to moving Thai state more developmental direction
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
29
SME
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
30
CEO PM transforms Thai state to be his own machine
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
31
The others factors of lacking in industrial upgrading
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
32
Conclusion
Unique opportunity to bring industrial forward and more development direction
More concerning with macro and micro level of international competitiveness than previous ministers
33
Conclusion
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
34
Exodus to London
Being homeless one
35