1 thailand: investment climate, firm competitiveness, and growth world bank’s presentation of...
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3 Objectives of the Study The productivity and Investment Climate Study (PICS) is a mechanism for: –Assisting business-government dialogue by providing hard data as basis for discussions; –Receiving feedback from firms on obstacles they face in doing business; –Measuring the impact of reforms, and refocusing the agenda on most relevant and pressing concerns. The PICS supplies the government with: –A tool to monitor industry performance, facts and figures instead of complaints, –Benchmark indicators for comparisons with competitor countries, –Feedback on existing industry support schemes, providing clear priorities for action. The PICS supplies firms with a checklist of competitive practices.TRANSCRIPT
1
Thailand: Investment Climate, Firm Competitiveness, and
GrowthWorld Bank’s Presentation of Preliminary
Findings Workshop
Intercontinental Hotel, Bangkok, June 10, 2005
2
The Report Team• Albert Zeufack, EASPR (Task Team Leader), Barry Bosworth
(The Brookings Institutions, Consultant), Amadou Dem (EASPR), Ana Margarida Fernandes (DECRG), Tenzin Norbhu (CITPO), Magdi Amin (EASFP), Kaspar Richter (EASPR), Charles Udomsaph (EASPR), Khuankaew Varakornkarn (EASHD), Paul Welsh (Consultant for the NEED project). The report team receives overall guidance from Kazi Matin, Lead Economist for Thailand.
• Peer Reviewers are: Aart Kraay (DECRG), William Maloney (LACVP), and Shahid Yusuf (DECRG).
• The report is based on data from the Productivity and Investment Climate Survey (PICS), a large survey of 1500 establishments in Manufacturing and 100 in ICT, and around 14,000 workers, conducted under the supervision of the Foundation for Thailand Productivity Institute (FTPI) with the help of the World Bank. Additional sources of information were used to complement the PICS.
3
Objectives of the Study• The productivity and Investment Climate Study (PICS) is a
mechanism for:– Assisting business-government dialogue by providing hard data as
basis for discussions; – Receiving feedback from firms on obstacles they face in doing
business; – Measuring the impact of reforms, and refocusing the agenda on most
relevant and pressing concerns. • The PICS supplies the government with:
– A tool to monitor industry performance, facts and figures instead of complaints,
– Benchmark indicators for comparisons with competitor countries, – Feedback on existing industry support schemes, providing clear
priorities for action. • The PICS supplies firms with a checklist of competitive
practices.
4
Structure of the Report
• Chapter 1: Growth, Productivity and Investment Climate
• Chapter 2: Regional Investment Climate and Firm Performance
• Chapter 3: Supplying Skills for Competitiveness• Chapter 4: Strenghtening Firms’ Technological
Capabilities• Chapter 5: Improving ICT Use and Performance
5
Structure of the Presentation
• I. Growth and the Investment Climate• II. How is Thailand’s Investment
Climate?• III. Do Investment Climate Constraints
Affect Thailand’s Competitiveness?• IV. Some Policy Implications
6
Key Messages• The Thai Investment Climate is good by international standards. It’s definitely
better than most neighboring countries (except Malaysia) and better than India and Brazil.
• However, Thai firms have identified Regulatory burden, Skills Shortages and Infrastructure as the three most binding constraints to their activity.
• These constraints appear to have a significant negative impact on Thailand Competitiveness.– Most Productive Firms (Large, Exporting, Foreign Invested, High-Tech) are the most
affected by regulatory burden, the most important investment climate constraint.– Regions witnessing the most important rate of firms creation (Eastern Seaboard and
Center) have a poorer investment climate than Bangkok. A better investment climate in these regions would boost Thailand competitiveness.
– Skills shortages are costing in average 15% of sales to Thai firms. There is a high premium to tertiary education graduates and less so for Secondary education graduates. Firms seems to be coping for poor quality secondary education by providing significant levels of training to workers. English and ICT skills lack the most.
– Technological capabilities of firms in Thailand are relatively weak, except [fortunately] for the three industries that have been contributing the highest percentage of exports since the crisis (Auto-Parts, Electronics, and Machinery and Equipment).
– ICT use and performance remains weak, constrained by ICT skills shortages.
7
I. Growth and the Investment Climate
8
• Growth in factors (capital and labor) was the main source of Thailand’s economic growth in past decades. TFP’s contribution was negligible.
• But, sustaining growth in the future may require shifting to a productivity-driven growth strategy.
• Improving the business climate is key to reducing risks and costs, and to increasing productivity, hence the competitiveness of the Thai economy.
A Low contribution of TFP to Thailand Long-Run Growth
9
Sources of Output Growth, Total Economy
1
2
3
4
5
1977 1982 1987 1992 1997 2002Year
Inde
x
Total
Employment
Capital
TFP
Labor Quality
10
Sources of Output Growth, Manufacturing
1
2
3
4
5
6
7
8
1977 1982 1987 1992 1997 2002Year
Inde
x
Total
Employment
Capital
TFP
Labor quality
11
The need to shift to a productivity-driven growth
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Private Equipment Investment/GDP Private Gross Fixed Capital Formation/GDP
Figure 1: Private Equipment and Total Investment to GDP Ratio in Thailand 1980-2003.
01234567
FDI/GDP in Thailand
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Thailand's Share in FDI into East Asia and Pacific
Panel A Panel B Figure 2: Panel A. FDI to GDP Ratio in Thailand 1980-2003.
Panel B. Thailand’s Share in Total FDI into East Asia and Pacific 1980-2003.
12
II. How is Thailand Investment Climate?
GOOD!In Average, Better Than in Most Neighboring
Countries in East Asia, Except Malaysia;Better than in India, and Brazil.
13
Major Business Climate Concerns for Thai Firms
(Results from Open-Ended Question)
0 10 20 30 40 50 60 70
Dissatisfaction withEconomic Situation
Infrastructure andSupport Services
Skilled Labor Shortage
Regulatory Burden
Percent of Firms Identifying Issues as One of Three Top Obstacles
14
A. Bureaucratic Burden 1. Time (number of days) to clear customs for imports
0 5 10 15
Estonia
Malaysia
Slovenia
Turkey
Thailand
Indonesia
Russia
India
China
Philippines
Brazil
Source: World Bank PICS surveys.
15
Bureaucratic Burden 2. Labor regulations in Thailand are more restrictive than in key comparator countries such as
China, Malaysia
Brazil
Chile
India
Indonesia
KoreaMalaysia
Philippines
SingaporeU.S.
ChinaThailand
0
20
40
60
80
100
120
140
160
180
200
220
0 10 20 30 40 50 60 70 80 90 100
Index of Overall Restrictiveness of Labor Market Regulations
Day
s to
Sta
rt a
Bus
ines
s
25th Percentile Start Business = 26 Days
25th Percentile Index of Labor Market
Regulations = 26.2
Source: World Bank Doing Business Indicators 2004.
16
Bureaucratic Burden The issue is less with the time it takes to obtain
authorizations, but more with the unpredictability…(coefficient of variation)
Number of Days to Obtain Different Licenses/Permits/Approvals/ Certificates
Avg. St. Dev. Coeff. Variat. Median N. Obs.Ministry of Commerce 10 20 1.9 2 964Department of Industrial Works 17 22 1.3 7 926Immigration Department 10 14 1.4 3 80Land Office 13 22 1.7 3 131Local Government 10 15 1.6 2 419Approval for Construction 36 40 1.1 30 242Import Permit 13 18 1.4 7 164Operating License 39 58 1.5 30 188
Number of Days to Process Application for Different Export Incentives
Avg. St. Dev. Coeff. Variat. Median N. Obs.E-commerce Export Promotion 33 145 4.4 7 56Promotion of Thailand Brands 41 61 1.5 30 62Exports Promotion to new market (2003-2005) 18 19 1.0 10 39Distribution Networking 32 48 1.5 23 12Arrange sale promotion with Department store 17 13 0.7 7 11Export one stop service 15 13 0.9 11 14Prime Minister’s Export Award 2003 (PM Award) 21 20 1.0 14 13Deduction on Cost of Developing Websites 28 16 0.6 30 10Tax Incentives for Offshore Trading Via Websites 30 31 1.0 23 8
17
Time (number of days) to clear customs for exports
0 2 4 6 8 10
Thailand
Estonia
Turkey
Slovenia
Malaysia
Indonesia
India
China
Philippines
Brazil
Russia
Source: World Bank PICS surveys.
Thailand performs well on some aspects of regulation
18
B. Thai Firms Identify Skills Shortages as a Severe Constraint to their operations…
… Irrespective of Firm SizePercent of Firms Identifying Skills and Education of Available
Workers as a "Severe" or "Very Severe" Obstacle
0.0
10.0
20.0
30.0
40.0
50.0
Small Medium Large
19
Percent of Firms Identifying Skills and Education of Available Workers as a "Severe" or "Very Severe" Obstacle
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Food
Pro
cessi
ng
Textil
es
Garm
ents
Auto-
parts
Electr
on./A
pplia
nces
Rubbe
r/Plas
tics
Woo
d/Fu
rnitu
reM
achi
n./Equ
ipm
.
Skills Shortages as a Severe Constraint…… More So in Garments
20
Skills Shortages as a Severe Constraint in all Regions…… More So in the East Region and in Bangkok
Percent of Firms Identifying Skills and Education of Available Workers as a "Severe" or "Very Severe" Obstacle
0.0
10.0
20.0
30.0
40.0
50.0
NorthRegion
CentralRegion
BangkhokRegion
East Region
NortheastRegion
SouthRegion
21
C. Infrastructure: A Severe Business Climate Constraint for Thai Firms
Source: World Bank PICS surveys.
Frequency of Power Outages (Number of Times Last Year)
0 5 10 15 20
Slovenia
Turkey
Estonia
Indonesia
Brazil
China
Russia
Philippines
Malaysia
Thailand
Note: India with 210 days is not shown due to space constraints.
Number of Days to Obtain an Electricity Connection
0 20 40 60 80
Turkey
Estonia
Slovenia
Russia
Philippines
Malaysia
Indonesia
China
Brazil
Thailand
India
22
Number of Days to Obtain a Water Connection
0 5 10 15 20 25
Malaysia
Indonesia
Brazil
Thailand
23
Frequency of Insufficient Water Supply Last Year
0 2 4 6 8 10 12
Brazil
Indonesia
Thailand
Malaysia
Philipines
24
Percentage of Water Coming from Own Sources
0 10 20 30 40 50 60 70
Malaysia
Brazil
Philipines
Thailand
Indonesia
25
Frequency of Phone Interruptions Last Year
0 1 2 3 4 5 6 7
Indonesia
Philipines
Brazil
Malaysia
Thailand
26
Frequency of Transport Disruptions Last Year
0 0.5 1 1.5 2 2.5 3
Brazil
Philipines
Thailand
Indonesia
Malaysia
27
However, Power Outages have lower incidence than in benchmark countries
Percent of Production Lost Due to Power Outages
0 2 4 6 8 10
Malaysia
Thailand
China
Brazil
Indonesia
Philippines
India
Shipment Losses due to Breakage/Theft/Spoilage (% of Sales)
0 0.5 1 1.5 2 2.5
Malaysia
Thailand
Brazil
China
Indonesia
28
III. Do Investment Climate Constraints Affect Thailand
Competitiveness?
Yes, Significantly!
Through 4 channels:1. Disproportionate impact of investment climate
constraints on more productive firms2. Poorer Investment Climate in expanding Regions 3. Skills Shortages4. Low Technological Capability of Firms and low
ICT usage
29
Determinants of Firm Performance Main Messages
• Larger firms are significantly more productive than small firms
• Exporters & foreign-owned firms are significantly more productive
• Firms using more computer-controlled machinery are more productive
• Firm performance (labor productivity and TFP) is lower in Northeast and South regions than in Bangkok
30
Performance and Firm Characteristics
Notes: OLS estimation. *** and ** represent significance at 1 and 5 percent confidence levels. The regressions include industry fixed effects and region fixed effects.
Regressors Total Factor Productivity
Sales Growth
Labor Productivity
Firm Age 0.003** -0.003*** 0.010***(0.002) (0.001) (0.003)
Current Employment 0.087*** -0.015 -0.019(0.015) (0.009) (0.025)
Exporter Dummy (more than 10%) 0.084*** -0.013 0.273***(0.028) (0.022) (0.060)
Foreign Ownership Dummy 0.133*** -0.029 0.438***(0.032) (0.026) (0.064)
Capital Vintage (% Mach.Under 5 Years) 0.037 0.081** 0.115(0.047) (0.038) (0.094)
% Computer-Controlled Machinery 0.144*** -0.027 0.285***(0.048) (0.035) (0.097)
R&D Spending Dummy 0.010 0.008 0.049(0.031) (0.022) (0.057)
N. Observations 1033 1033 1033
31
International comparisonsLabor Productivity - Food Processing
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
Labor Productivity - Textiles
0
2000
4000
6000
8000
10000
12000
14000
16000
32
International comparisonsLabor Productivity - Garments
0
2000
4000
6000
8000
10000Labor Productivity - Electronics/Electrical Appliances
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
22000
24000
33
0
10
20
30
40
50
60
70
Small Medium Large
Perc
ent F
irm
s Ide
ntify
ing
Issu
es a
s Maj
or T
hree
Con
cern
s
Skilled Labor Shortage Dissatisfaction Economic SituationRegulatory burden Infrastructure and support services
1. Disproportionate impact of investment climate constraints on more productive firmsMedium and large firms are more likely to consider regulatory burden a
severe constraint to operations
Percent of Firms Identifying Issues as one of Top 3 Constraints
34
0
10
20
30
40
50
60
70
Noncomputerized Machinery Computerized Machinery
Perc
ent F
irm
s Ide
ntify
ing
Issu
es a
s Maj
or T
hree
Con
cern
s
Skilled Labor Shortage Dissatisfaction Economic SituationRegulatory burden Infrastructure and support services
Firms using more computer-controlled machinery are more likely to consider regulatory burden a major
obstacle to doing business
Percent of Firms Identifying Issues as one of Top 3 Constraints
35
2. Poorer Investment Climate in expanding Regions Regional Breakdown of Manufacturing GDP
• The role of Bangkok and Vicinity as Thailand’s factory hub has declinedover the last 25 years
• East and Central have expanded• Little change in North, Northeast, and South
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Bangkok Vicinity Central East West North Northeast South
36
Spatial distribution of manufacturing employment, 1997 - 2002
• Size of circles presents number of workers in manufacturing sector• Increasing clustering of manufacturing employment in BKK, VIC, EAST, CENTRAL
37
• Bangkok Companies report less problems with:– Telecommunications, electricity, infrastructure, and business support
supply– Credit access and insurance
• Bangkok Companies report more problems with:– Corruption– Skilled labour shortages– Competition from imports– Utility prices
• In addition, “low-tech” Bangkok Companies report more problems with: – Marco-stability– Anti-competitive practices– Regulations for start-up.
Location Choice Bangkok/Vicinity versus Rest of the County
Investment Climate
38
Total Factor Productivity – Regional Comparison II
Fra
ctio
n
H ig h -T e c h T F P D is tr ib u tio n s A c tu r a l T F P
N o rth
0
.1
.2
.3
C e n tra l -2 p ro v B a n g ko k+ 2 c e n t ra l p ro v .
E a s t
.2 .4 .5 .6 .7 .8 .9 11 .11 .21 .31 .41 .51 .60
.1
.2
.3
N o rth e a s t
.2 .4 .5 .6 .7 .8 .9 11 .11 .21 .31 .41 .51 .6
S o u th
.2 .4 .5 .6 .7 .8 .9 11 .11 .21 .31 .41 .51 .6
• For Automotive, Electronic Appliances, Rubber and Plastics and Machinery and Equipment: Bangkok and Vicinity have higher productivity than other regions
• Plus: These industries have higher productivity than the low-tech industries
39
Simulated TFP Outside of Bangkok/Vicinity Using
Returns of Bangkok and Vicinity
• If companies outside of Bangkok/Vicinity had the same returns on company and product characteristics as in BKK/VIC, their productivity would be higher than in BKK/VIC in high-tech industries
Fra
cti
on
H ig h - T e c h S im u la te d T F P u s in g B a n g k o k r e tu r n sS im u la t e d T F P
N o r th
0.1.2.3
C e n tra l -2 p ro v B a n g ko k+ 2 c e n t ra l p ro v .
E a s t
. 2 .4 .5 .6 .7 .8 .9 1 1 .11 .21 .31 .41 .51 .60
.1
.2
.3
N o r th e a s t
.2 .4 .5 .6 .7 .8 .9 11 .11 .21 .31 .41 . 51 .6
S o u th
.2 .4 .5 .6 .7 .8 .9 11 .11 . 21 . 31 . 41 .51 .6
40
3. Skills Shortages Impose a Significant Cost to Thailand Competitiveness
Estimates of Benefits from Relaxing Skills ShortagesIndustry
Benefit from reducing skill shortages as % sales
Food Processing 8.2Textiles 14.1Clothing 10.7Auto-parts 4.6Electronics and Electrical Appliances 3.6Rubber and Plastics 27.7Wood Products and Furniture 44.8Machinery and Equipment 7.8
• If firms increased their skill intensity to optimal skill mix in industry benefits would be large, on average 15% of sales • Larger benefits from relaxing skills shortages occur in industries where vacancies for professionals take longer to fill (i.e., where skill shortages are more binding)
41
Food ProcessingTextiles
Clothing
Auto-parts
Electronics/Elec. Appliances
Rubber/Plastics
Wood Products/Furnit.
Machinery/Equipment
4
5
5
6
6
7
7
8
8
9
0 5 10 15 20 25 30 35 40 45 50
% Sales Gain from Reduction in Skill Shortages
Num
ber
of D
ays T
aken
to F
ill L
ates
t V
acan
cy fo
r a
Prof
essio
nal
`
• Benefits from relaxing skills shortages are larger in industries where time needed to fill vacancy for professional is longer
42
Shortages Translate into very High Returns to Shortages Translate into very High Returns to Schooling, especially to Tertiary EducationSchooling, especially to Tertiary Education
(Relative to comparison group with 9 or less completed years of formal education.)
0
20
40
60
80
100
120
10 11 12 13 14 15 16 over 16Completed Years of Formal Education
Perc
enta
ge In
crea
se in
Hou
rly
Wag
es
ThailandMalaysia
43
…And the gap between wage premiums for Tertiary and secondary Education Graduates has been high for the
past 15 Years
Real Monthly Wages by Education of Monthly Wage Earners 1991 – 2004 (LFS)
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
F91 A91 F92 A92 F93 A93 F94 A94 F95 A95 F96 A96 F97 A97 F98 A98 F99 A99 F00 A00 F01 A01 F02 A02 F03 A03 F04 A04
None Less than Primary Primary Lower Secondary
Upper Secondary Vocational University Overall
44
An issue with quality…Thai Secondary Education Students score lower than
average in International Tests TIMSS Score
1995 1999
Country Math Science Math Science Hong Kong 568.89 509.73 582.06 529.55 Indonesia 403.07 435.47
Japan 581.07 554.47 578.6 549.65
South Korea 580.72 545.78 587.15 548.64
Malaysia 519.26 492.43 Philippines 344.91 345.23 Singapore 608.59 580.35 604.39 567.89
Taiwan 585.12 569.08 Thailand 516.22 510.04 467.38 482.31
Source: Trend in Mathematic and Science Study (TIMSS)
PISA Score 2003 math science reading
Japan 553 548 598
Korea 552 538 534
Hong Kong 558 539 510
Indonesia 361 395 382
Macao-China 528 525 498
Thailand 424 429 420
OECD Average 496 500 494 Source: Program for International Student Assessment (PISA), Organization of Economic Cooperation and
Development (OECD)
45
English Language and ICT Skills are the skills the English Language and ICT Skills are the skills the worker lack the most in Thailand, with significant worker lack the most in Thailand, with significant
impact on wages impact on wages Thailand Malaysia Thailand Malaysia
Management 0.765** 0.555** Off-the-job training/certification (0.010) 0.044**
(0.018) (0.022) (0.021) (0.014)Professionals 0.412** 0.450** Basic (Computer Skills) 0.094** 0.102**
(0.015) (0.026) (0.011) (0.015)Skilled production workers 0.194** 0.224** Moderate (Computer Skills) 0.173** 0.203**
(0.009) (0.015) (0.013) (0.018)Nonproduction workers 0.178** 0.226** Complex (Computer Skills) 0.256** 0.166**
(0.011) (0.018) (0.023) (0.030)Production technologies 0.024 0.040* Lack English proficiency in doing job -0.026** -0.003
(0.015) (0.018) (0.008) (0.012)Marketing 0.120** (0.028) Studied abroad 0.321** 0.080**
(0.030) (0.040) (0.037) (0.025)Information technology 0.000 0.059* People skills 0.070** 0.056**
(0.023) (0.026) (0.009) (0.013)Management/quality technologies 0.045** 0.076** Distance from job 0.287** 0.193**
(0.014) (0.018) (0.028) (0.045)Intellectual property (0.010) 0.032 Unmarried female -0.093** -0.138**
(0.040) (0.086) (0.011) (0.017)Safety procedures -0.046** 0.010 Married male 0.061** 0.138**
(0.014) (0.021) (0.011) (0.016)Language skills 0.062 (0.023) Married female -0.102** -0.130**
(0.033) (0.034) (0.011) (0.017)Other (On-the-job Training) 0.082** 0.020 Tenure 0.022** 0.022**
(0.020) (0.044) (0.002) (0.002)On-the-job training received from
previous employer 0.048** 0.077**Tenure Squared
-0.0002* -0.0002**
(0.010) (0.016) 0.00006 0.00007
[Dependent Variable: individual log hourly wage]
46
3. Thailand’s Past Technological Performance has been Modest
Source: Global Competitiveness Report, 2004-2005
Technological readiness index Innovation index
China 54 26Indonesia 64 33Philippines 63 76Malaysia 28 25Singapore 7 11Thailand 46 42Brazil 42 32Bulgaria 62 84Peru 75 94Romania 53 53Tunisia 47 34
47
And “High Tech Exports” is Not Necessarily Equal to Competitiveness!!
Vietnam
Thailand
Sri Lanka
Philippines
Pakistan
Mexico
Malaysia
Indonesia
IndiaColombia
China
Chile
Brazil
BangladeshArgentina0
15
30
45
60
75
0.00 20.00 40.00 60.00 80.00 100.00
Manufactures exports (% of merchandise exports)
Hig
h-te
chno
logy
exp
orts
(% o
f man
ufac
ture
d ex
ports
)
48
Technological Capabilities IndexINVESTMENT PRODUCTION LINKAGES WITHIN
ECONOMY
Expect to make a substantial increase in investment in order to increase capacity or improve quality? What percentage of your next investment will be IT related? Training of workforce to implement technology transferred from parent establishment? If a supplier to a MNC and learned new technology from that MNC, was it explicitly via MNC licensing, training, quality certification programs? Run formal in-house training programs for employees? Send employees to formal training programs run by other organizations?
Upgraded machinery & equipment? Upgraded an existing product line? Paid royalties? Has your firm received any ISO (e.g. 9000, 9002, or 14,000) certification? Adaptation or R&D of technology transferred from parent establishment to suit local conditions? Subcontract R&D project to other companies or organizations? Entered new markets due to process or product improvements in cost or quality? Introduced new technology that has substantially changed the way the main product is produced? Filed any patent/ utility models or copyright protected materials? Developed a new product line? Planning to introduce new designs or products in the next 2 years? Employ staff exclusively for design/doing innovation/R&D? Have you received any government incentives to conduct technological innovation and R&D? What percentage of your production machines is computer controlled?
If a supplier to a MNC, did you learn any new technology from that MNC? Use e-mail in interactions with clients and suppliers? Use website in interactions with clients and suppliers? Technology innovation developed in collaboration with other firms? Technology innovation developed in collaboration with universities? Technology innovation developed in collaboration with research institutions? Technology innovation developed in collaboration with multilateral agencies or other institutions?
49
TCI by Size
0
0.5
1
1.5
2
2.5
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Technological Capabilities Index
Den
sity
LargeSME
50
TCI by Region
0
0.5
1
1.5
2
2.5
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Technological Capabilities Index
Den
sity
North Central BangkokEast Northeast South
East
Central
South Bangkok
Northeast
North
51
TCI by Industry
0
0.5
1
1.5
2
2.5
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Technological Capabilities Index
Den
sity
Food Processing Textiles ClothingAuto Parts Electronics & Electrical Appliances Rubber & PlasticsWood & Wood Furniture Machinery & Equipment
Clothing
Textiles
Food Processing
Auto Parts
Electronics & Electrical Appliances
Wood & Wood FurnitureRubber &
Plastics
Machinery & Equipment
52
Production TCI by Industry
0
0.5
1
1.5
2
2.5
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Technological Capabilities Index
Den
sity
Food Processing Textiles ClothingAuto Parts Electronics & Electrical Appliances Rubber & PlasticsWood & Wood Furniture Machinery & Equipment
Clothing
Textiles
Food Processing
Auto Parts
Electronics & Electrical Appliances
Wood & Wood Furniture
Rubber & Plastics
Machinery & Equipment
53
Linkages TCI by Industry
0
0.5
1
1.5
2
2.5
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Technological Capabilities Index
Den
sity
Food Processing Textiles ClothingAuto Parts Electronics & Electrical Appliances Rubber & PlasticsWood & Wood Furniture Machinery & Equipment
54
4. ICT Use and Performance: PICS Results
Email/Website Use by Firm Size, Ownership, Export Orientation
Small Foreigner exporter
Small Domestic Exporter
Small Foreign Non-Exporter
Small Domestic Non-Exporter
Medium Foreigner Exporter
Medium Domestic Exporter
Medium Foreign Non-Exporter
Medium Domestic Non-Exporter
Large Foreigner Exporter
Large Foreign Non-ExporterLarge Domestic Non-
Exporter
0
10
20
30
40
50
60
0 20 40 60 80 100Email Use
Web
site
Use
Large Domestic Exporter
Source: Investment Climate Survey (2004), World Bank
55
ICT use among manufacturing firms – PICS results
Regional variations exist in ICT use
• Over 50% of firms in Bangkok, Eastern, North and Central regions use email while less than 30% of firms in Northeast and South use email
• 61% of firms in Bangkok has made sales online, while this is true only for 14% of the firms in the other regions
• Access to the Internet, email and website use is only the first step, other steps are necessary for firms to conduct significant portions of their business online
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ICT use among manufacturing firms – PICS results
Inadequate IT skills impact firm performance
• 45% of manufacturing firms rated the IT skills of their skilled production workers as “very poor.”
• Thai firms perceive, lack of knowledge, availability of trained IT personnel and experienced consultants to be major constraints in adopting ICTs
• Small firms especially perceive these to be severe constraints
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ICT use among manufacturing firms – PICS results
Constraints to introducing or expanding IT use considered “important” or “very important”
Constraints Small Medium Large
High cost of IT equipment and maintenance 20% 18% 18%
Lack of knowledge and trained IT personnel 42% 35% 33%
Low returns to investments in IT 15% 12% 11%
Lack of experienced consultants to provide or design IT-based solution systems 39% 37% 32%
IT-based systems do not improve productivity 20% 13% 13%
Source: Investment Climate Survey (2004), World Bank
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ICT use among manufacturing firms – PICS resultsThai firms When comparing firm perception of IT affordaility with the average perception of 50 other developing countries, Thai firms are
much more concerned or hindered by costly IT services.
Firm Perception that IT Services are NOT affordable
0102030405060708090
Small Medium Large
% o
f Firm
s
Thailand 50 Countries
Source: Investment Climate Survey (2004), World Bank
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IV. Some Policy Implications
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Some Policy Implications• Firms point to labor regulations, import
regulations, and the unpredictability of entry regulations as areas needing government’s close attention.
• Small firms are less productive than large, train less workers... What are the implications for SME policies?
• Improving infrastructure and institutional deficits in the regions outside of BKK/VIC is essential for the sustaining expansion and entry of exported- oriented companies and Thailand competitiveness and growth.
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Some Policy Implications• English and ICT skills are key to innovation and
competitiveness. There is a need to reinforce these skills at the secondary education level.
• There is a need to look beyond high-tech export’s ratio and strengthen all dimensions of technological capabilities of firms to spark productivity-enhancing technological progress, especially increasing linkages.
• Lack of knowledge and trained IT personnel is the most important constraint to introducing and expanding IT use. Skills, not Machines may be the culprit.