higher education and thailandâ€™s national innovation system

DRAFT FOR DISCUSSION – DO NOT CITE

Higher Education and Thailand’s National Innovation System

Richard F. DonerPatarapong Intarakumnerd

Bryan K. Ritchie

March, 2010

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I. Introduction

Thailand's position on the global development scale has become ambiguous. On the one hand, as documented in Section II, the country has not only achieved impressive GDP growth rates over the past half century. Thailand also significantly diversified its economy, becoming one of the world's leading exporters in products ranging from rice, to sugar, to rubber, to garments, to pickup trucks, to computer components. In so doing, the country has reduced its vulnerability to exogenous shocks and created a growing range of opportunities for its citizens.

But limits to the country's growth strategy began to become apparent even before Thailand became the first victim of the 1997 Asian financial crisis. Although weaknesses in the financial sector drew most of the attention, problems in the real sector were arguably more serious for the longer term. Most strikingly, manufacturing export growth weakened in the first half of the decade and stagnated in 1996. Some of this was due to a cyclical slowdown in global demand. But the decline in Thailand was significantly higher than elsewhere in the region, leading economists to conclude that the most important contributing factor was Thailand's deteriorating international competitiveness in labor-intensive manufactured goods. Faced with new, low-wage competitors, such as India, China, Vietnam, and the Philippines, Thailand experienced sharp rises in wage rates during the early 1990s that were "not matched by an increase in labour productivity."1 Thai firms failed to use "their temporary low production cost advantage as a stepping-stone for the creation of more durable competitive advantages based on productivity, quality, and timeliness."2

It had become clear that Thailand suffered from a significant gap between the advanced nature of its export structure and the much more modest technological levels in its production processes. Sustained growth would require domestic innovation and technological development. Without such capacities, Thailand risked finding itself in a "middle-income trap" in which it was squeezed by lower-wage rivals such as Vietnam but lacking the technological capacities to compete with higher-wage, higher productivity rivals such as Taiwan.3

This uneven performance reflects the strengths and weaknesses of Thai institutions. The country's impressive diversification has been a function of bureaucratic agencies, business associations, commercial banks, and public-private arrangements that helped to overcomethe information and coordination externalities inherent in the mobilization of resources that are “hidden, scattered, or badly utilized” for investment in new activities ranging from sugar, to garments, to autos.4 Yet Thai institutions have not facilitated the innovation and related technology5 highlighted by the World Bank as necessary for sustained growth. The country's national innovation system - its government agencies, its firms, its specialized financial mechanisms, and its universities, technical training institutes and research 1 Nipon and Somkiat (2001, 122). Thai wages grew at a 2% annual rate from 1982 to 1990 and then at 9% a year in the following four years (Warr 1998, 57; see also Nipon and Somkiat 2001, 122). A 1998 study concluded that, despite its intensive growth during the 1980s, Thailand’s export structure was closer to that of the Philippines than Taiwan, Singapore, South Korea or even Malaysia (Lall 1998).2 Lauridsen (2002b, 159).3 See World Bank (2006a); Gill and Kharas (2007); World Bank (2008). 4 Rodrik (2007); Hirschman (1958, 5). For a review of diversification-promoting institutions, see Doner (2009, Ch. 4). 5 Technology can be mainly classified into two groups: embodied technology (machine, equipment, people) and disembodied technology (blueprint, report, literature) (Bell and Pavitt, 1995)

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organizations - has remained weak and fragmented. Most disturbingly, this has occurred even as Thailand has deepened its global exposure.

This is not for lack of attention to technology, innovation, and upgrading, and to the role of higher education institutions in such development. As discussed below, Thai officials and business leaders have set S&T policies,6 established research institutes, established skill development funds, designed Five-Year Plans and sectoral master plans, consolidated technology and vocational education and training (TVET), and encouraged closer ties between tertiary education institutions and business. A largely accurate but harsh judgment is that these efforts amount to "advanced lip service."7

Previous studies have reached similar conclusions.8 In the present study, we build on andadd to prior work by emphasizing the role of the higher education component in Thailand's NIS; by updating the evaluation through national R&D and innovation surveys and through sectoral analysis based on both survey and more qualitative research; by positioning the analysis within the shifting challenges and opportunities of global value chains; and by tracing the political economy of the country's NIS. We suggest that Thailand’s development trajectory has contributed to two factors - informal labor markets and a relatively weak group of indigenous manufacturers – that in turn limit both the demand for and supply of innovation-promoting institutions, while promoting political fragmentation.

This contention raises two broader questions addressed at the end of the paper, but that merit brief discussion here. One is whether a weak NIS is in fact a problem in light of Thailand's relatively consistent per capita income growth and impressive diversification. Our response is that it is a problem in the medium, if not the short term. One indicator, noted above, is the country's loss of comparative advantage in labor-intensive manufacturing even prior to the 1997 financial crisis. This is especially problematic in light not only of the recent work on middle-income traps noted above, but also of findings that 1) sustained growth in middle income countries requires less diversification and more specialization in a smaller number of technologically sophisticated sectors; and 2) that such specialization in turn requires policies and institutions, especially in education, different than those that generated growth through low-income and lower-middle income status.9 It is possible, given that Thailand is still at a relatively low point on the middle-income spectrum, that the country has a window of opportunity. But improving productivity and technology requires investments in institutions that have long gestation periods; and as discussed below, Thailand's commitment to such investments is weaker than those of the East Asian NICs when they were at similar levels of development. Further, we are concerned about a vicious cycle, i.e. that failure to deepen the country's production structure may intensify the political fragmentation that has itself impeded progress in the Thai NIS. At least in the Thai case, shallow production structures have encouraged rent

6 Science policy encourages scientific education and research in universities and government labs. Technology policy provides support for the creation of strategic or generic technologies, e.g. biotechnology, and promotes technology infrastrcture, e.g. digital networks. Innovation policy encourages firm-level technological capabilities through, for example, subsidized research and development. (Dodgson 2000, p. 232).7 The phrase was used by Yevgeny Kuznetsov in comments on a related paper presented at the AIB Conference on Research Frontiers in International Business, Charleston, S.C., December 4, 2009. 8 See e.g. Felkder (2003); Intarakumnerd (2006a); and Intarakumnerd and Brimble (2007). 9 Imbs and Wacziarg (2003, 77); Yusuf and Nabeshima (2009, Ch. 3); See Gill and Kharas (2007, p. 5); and Lee and Kim (2009).

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seeking to generate profits, which encourages fragmentation and competition among political elites.

This raises the related question of whether efforts to improve the Thai NIS amount to pushing on a string. Is significant improvement possible, especially in light of ostensibly weak private sector demand for and efforts to promote innovation capacity? Our answer is "no," if the improvement is assumed to mean total transformation of the system. But our answer is "yes," if progress is understood as a sector-specific process and if we endogenize private sector demand in light of alternative market opportunities and political obstacles. As noted later in the paper, specific sectors exhibit characteristics that seem to encourage higher demand for and supply of improved education as well as other NIS-related institutions.10 Viewed in this way, the sector-specific successes of Chile's aquaculture, Argentina's wine, and Penang's electronics constitute as useful exemplars as Korea and Taiwan. A key task for this paper is then to draw positive lessons from what is an otherwise discouraging picture.

The paper proceeds as follows: Section II reviews Thailand's economic performance - its overall growth indicators, including the nature of its exports -- and the science and technology capacities that help to explain this performance. Section III examines key components of Thailand's NIS - the institutional configuration underlying the country's S&T capacities. The section covers firms, government, and financial institutions but emphasizes higher education, especially universities and university-industry linkages. Section IV Section examines the NIS and its political influences through the lenses of several sectors that exhibit the decidedly mixed performance of the Thai economy as a whole and that reflect the challenges posed by Thailand's external environment. Section V traces the broader political dynamics within which the Thai NIS has evolved. Section Section VI summarizes our findings and offers thoughts for future policy and research.

II. Economic Performance

A. Strengths

Highlighting the limitations in Thailand's NIS risks minimizing the country's impressive development achievements. The World Bank was not misguided in labeling Thailand one of the High Performing Asian Economies (1993). Thailand has both achieved consistently high GDP growth rates and has significantly diversified its economy. As Table 1 shows, Thailand compares favorably even with the high-growth East Asian NICs when it comes to growth, exports, capital formation, and manufacturing.

Table 1: Macro-Economic Indicators Asian Economies, 1985–2007

Indicator Japan Singapore China Indonesia Korea, Rep.

of Malaysia Philippines Taiwan, China

GDP growth (%)

10 On "sectoral systems of innovation," see e.g. Malerba (2002).

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1960-69 10.4 9.6 3 3.6 8.3 6.6 5.0 —1970-79 4.1 8.3 7.5 7.8 8.2 7.8 5.9 —1980-89 3.5 7.6 9.8 6.2 7.8 5.8 2.0 —1990–95 2.1 8.9 10.9 8.1 8.0 9.4 2.3 7.01996–2000 1.0 6.4 8.6 1.0 4.6 5.0 4.0 5.82001–07 1.5 5.3 10.2 5.1 4.7 4.8 5.0 3.8

Per Capita Income Growth (constant 2000 US $)

1960 7118 2251 105 196 1157 815 6121970 17345 4531 122 235 1994 1145 7321980 23981 9043 186 397 3358 1919 989 32821990 33369 14658 392 612 6895 2608 901 97272000 36789 23019 949 800 11347 4030 977 191832008 40481 27991 1963 1083 15447 5155 1225 21445

Exports growth (%)1960-69 16.0 — — 3.0 30.0 5.4 3.9 —1970-79 8.8 — 22.5 10.7 22.9 8.3 8.4 —1980-89 5.8 — 5.1 1.8 11.5 9.2 7.8 —1990–95 3.8 — 12.4 9.9 13.4 16.4 8.4 7.81996–2000 5.8 — 15.0 4.2 16.0 8.9 6.4 9.92001–07 6.1 — 23.5 7.6 11.2 5.7 6.0 7.8

Gross capital formation (% of GDP)

1960-69 35.1 19.8 19.0 9.8 18.9 15.5 21.8 —1970-79 38.8 40.4 30.4 21.7 28.5 22.9 26.9 —1980-89 28.9 42.5 28.4 25.7 30.4 27.8 22.1 —1990–95 30.5 35.8 39.9 30.9 37.5 38.3 22.7 24.61996–2000 26.8 34.1 37.5 22.6 32.0 32.2 21.8 23.82001–07 23.4 20.9 41.1 24.1 29.7 22.4 16.3 20.2

Gross savings (% of GDP)1960-69 35.8 -3.9 — 8.0 8.6 22.0 21.6 —1970-79 39.7 28.6 30.3 24.9 22.1 27.0 24.9 —1980-89 31.9 41.7 35.5 31.7 30.9 30.2 20.4 —1990–95 32.3 46.8 41.6 26.1 36.5 32.5 19.7 26.01996–2000 28.1 49.9 39.8 24.8 35.2 37.1 25.6 23.02001–07 26.5 44.9 45.6 27.0 31.5 32.5 31.3 25.6

Manufacturing (% of GDP)1960-69 — — 29.0 8.8 12.6 9.5 24.3 —1970-79 — 24.6 37.2 10.5 21.7 16.9 25.7 —1980-89 — 26.2 35.9 15.5 27.4 18.5 25.2 —1990–95 — 27.0 33.3 22.3 27.2 25.8 24.1 28.61996–2000 22.7 25.1 32.5 26.2 27.6 29.7 22.2 24.72001–07 21.0 26.2 32.3 28.9 27.7 30.3 22.9 23.4

Medium and High Tech Products (% of Total Mfg)

1970-79 — — — — — — — —1980-89 24 36.2 — 1.1 16.7 39.5 — —1985-1990 — 46.9 — 8.7 32.3 36.5 — 341994-2000 — 79.4 — 23.2 62.3 69.1 — 61.12005-2009 19 46.5 29.7 10.8 33.5 51.7 53.6 —

Source: World Bank Development Indicators, 2009, Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.2, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September 2006.

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Thailand has diversified more extensively that its Southeast Asian neighbors as reflected, for example, in the decline of primary products in the country's exports from roughly 80% to roughly 10% between 1970 and 2006 (Table 2). Although the role of primary products has declined relative to that of industry, agriculture itself has diversified significantly, as Thailand has become one of the world's top exporters of a wide range of primary or primacy-based products, including not just rice, rubber, sugar and cassava but also prawns, canned pineapple, soy, and frozen sugar. At the beginning of the 21st century, Thailand was "Southeast Asia's most successful agricultural exporter."11 The growth and diversification of manufactured exports, in sectors ranging from textiles, to automobiles and parts, to electronic and electrical components, has been equally if not more impressive (Table 2). This growth has had significant "human development" benefits. The country will achieve most of the UN Millenium Development Goals well ahead of 2015: Poverty has declined from 38% in 1990 to 11% in 2004; most children are in school and for more years; malnutrition has declined by almost half; the annual rate of new HIV infections has fallen by over 90% since 1991.12

Table 2: Export Structure of Southeast Asian Countries, 1970–2006

Country Year

Electronic and

electricalOther high technology

Textile, garment,

and footwear

Other low technology Automotive Process Engineering

Primary products

Indonesia 1970 0.30 0.25 0.07 0.03 80.531980 0.47 0.07 0.61 0.18 0.02 0.40 0.03 85.311990 0.65 0.28 12.28 3.64 0.16 4.62 0.76 56.042000 12.90 0.45 15.03 8.25 0.81 5.47 4.52 31.992007 6.11 0.50 9.58 6.29 1.88 4.51 5.81 36.33

Malaysia 1970 0.27 0.41 0.78 0.85 0.48 0.52 0.82 64.611980 8.89 0.94 2.30 1.18 0.08 1.36 2.29 53.161990 25.70 1.85 5.95 5.46 0.42 2.13 9.96 26.052000 53.86 1.72 3.45 6.21 0.43 3.31 10.19 10.842007 40.65 2.63 2.75 8.66 0.66 5.15 9.99 15.90

Philippines 1970 0.00 0.01 0.75 1.42 0.00 0.54 0.14 14.321980 1.31 0.35 9.01 5.96 0.68 1.46 1.16 17.891990 13.12 0.22 16.30 11.41 0.52 5.03 4.74 20.592000 67.02 0.80 8.46 3.45 1.69 0.71 9.23 3.582007 48.16 0.99 5.80 4.86 5.66 1.78 8.52 10.23

Thailand 1970 0.04 0.13 1.48 0.66 0.25 0.53 0.47 80.591980 0.33 0.38 8.95 2.75 0.24 2.90 5.97 63.251990 16.15 0.37 20.45 10.55 0.57 3.36 6.44 24.032000 30.45 1.31 10.49 11.24 3.81 3.58 12.29 12.682006 25.20 1.57 12.17 9.16 6.62 6.58 15.49 10.35

Source: UN Comtrade, cited in Yusuf, and Nabeshima (2009, p. 9).

B. Weaknesses

The weakening growth of Thailand's labor-intensive, manufactured exports in the mid-1990s highlighted not just the loss of comparative advantage in low-wage sectors but also

11 Crispin and Goad (2000, p. 58). For an overview, see Doner (2009, Ch. 2). 12 UNDP (2007, 2).

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underlying weaknesses in mid- and high-tech products: limited local inputs, high trade dependency and, in some cases, denationalization. In 2005, the World Bank concluded that "high tech exports...(was)...a misleading indicator of technological performance," with Thailand remaining an assembler, not a manufacturer or designer.13 Local producers account for little of the value in mid- and high-tech industries.14 As Rasiah notes,"Domestic policies...have only favoured structural widening...the entire export-oriented sector has not developed import-replacing linkages."15 The result has been dualism, in which manufacturing, especially manufactured exports, is "often disembodied from the rest of the national economy..."16

Underlying these problems has been Thailand's failure to use its temporary low production-cost advantage to build more durable technological capacities on the part of local firms and workers. Factor accumulation - capital investment and employment of large reserves of underemployed labor - not technology-based productivity growth, has been the driving force behind Thai growth and diversification.17 This weakness is reflected in cross-national comparisons of science and technology indicators (Tables 3 and 4).

Table 3: Comparative technology indicators for Asia

Indo

Japa

n

Kor

ea

Mal

aysi

a

Phil

s.

Sing

apor

e

Tai

wan

Tha

ilan

d

Vie

tnam

IMD world competitiveness ranking (2008)

51 22 31 19 40 2 13 27 *

R&D exp. (% of GDP, 2000-2005)*

.0533 3.145 2.643 .6915 .1117 2.25 N/A .2614 *

S&T Human Resources (per million capita)

215 (2000)

5719 (2005)

2770(2005)

319 (2005)

N/A 4479(2000)

2980(1995)

159 (1995)

274(1995)

High- tech exports % of man exports (2005)

16 22 32 55 71 57 * 27 5.4

Internet hosts per million capita (2005)

.001212

258 20 15 3 271 * 5 1.1

Internet users per 1,000 capita (2005)

73 668 684 435 20 (2000)

324 (2000)

* 110 120

Source: Ritchie 2010* Thailand's R&D as % of GDP remained at 0.2% between 1992 and 2002 (Gill and Kharas 2007, p. 147). Yusuf and Nabeshima provide data on R&D Spending as Share of GDP, 1996-2006 (2009, p. 160, Table 7.1).

13 World Bank 2005a, p. 98). 14 For supporting data, see Doner (2009, pp. 34-36).15 Rasiah (2003, 60). On Thailand's trade deficits and denationalization, see Doner (2009, Ch. 2).16 Jomo (2001, p. 14). 17 Between 1980 and 2002, 90% of growth was a function of factor accumulation, most of which involved capital investment (Warr 2008).

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Table 4:ASEAN S&T Indicators

Malaysia Singapore Thailand GERD (% of GDP)* .69 (2002) 2.25 (2004) .26 (2003)

Public sector RSEs* in primary commodity research

77.8% .92% 47.88%

Private sector RSEs in primary commodity research

11.4% .14% 24.6% (1997)

Public R&D expenditure on primary commodity research

32.89% 2.2% 39.69%

Private R&D expenditure on primary commodity research

14.3% .23% 7.19%

Primary commodity exports (% of exports)

24% (1995) 14% (1995)18 26% (1995)

Private sector RSEs in electrical and electronics industry

18.08% 28.2% 7.9%19

Public sector RSEs in electrical and electronics

6.49% 26.1% .7%20

Total R&D expenditure for electronics industry

28.37% 45.25% 33.2%21

Source: Ritchie 2010* GERD=Gross Expenses on Research and Development; RSE=Research Scientist and Engineers.

Especially disturbing are historical comparisons of technological trajectories. For Thailand in 1996 to catch up with where Korea was in 1980, the country would have required a five-fold increase in R&D expenditures as a percent of GDP (up from 0.12 to 0.6) and more than a 20-fold increase in business-funded R&D (11% to 45%).22 This gap in turn reflects significant differences in commitments to build technology-promoting resources: A 2003 analysis concluded that Thailand's commitment "lags far behind" those made 10-20 years ago in the East Asian NICs "when their economies were at levels and structures of economic development roughly similar to those in Thailand today."23 Explaining these weaknesses in capacities and commitment leads to an analysis of Thailand's national innovation system and, eventually, the factors that influence its evolution.

Before turning to these, it is worth noting some downsides to our earlier, positivediscussion of Thailand's human development performance. The inequality picture is mixed: Income inequality in Thailand worsened from 1963 to 1986, with deterioration especially severe in the first half of the 1980s. The picture improved for the first time in 30 years from 1985 to 1988, worsened again in the early 1990s, then improved by 1996 and

18 Virtually 100% of this number consists of re-exports.19 Computer and communication technologies.20 Computer and communication technologies.21 Private sector only.22 Arnold et al 2002). 23 Bell (2003, p. 2).

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seems to have improved up through 2002. Indeed, Thailand seems to have bucked an East Asian regional trend of worsening inequality.24 But income inequality remains high, with the top 20% of the population enjoying 55.2% of total income compared to 4.3% for the bottom fifth; regional and urban-rural gaps have consistently widened in Thailand; levels of household indebtedness increased from one half to two-thirds between 1996 to 2004;and the informal sector accounts for somewhere between 50-60% of the labor force.25 We raise these issues in part because they are important components of development. But they can also help to explain the weaknesses of the national innovation system, described in the next section.

24 Data for the period up to 1996 drawn from Isra (2004, 408-410). For the period 1990-2002, see Gill and Kharas (2007, 64: figure 1.6; and 277: Table 6.3). 25 On inequality, see UNDP (2007). On the informal sector, see Schneider (2002; 2007); and Pasuk and Baker (2008). For an overview of concerns about inequality in East Asia, see ADB (2008).

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III. Thailand's National Innovation System

As noted, a national innovation system26 consists of firms, government agencies, specialized financial mechanisms, and educational institutions: universities, technical training institutes and research organizations. The logic underlying the NIS approach is that "the mix of technology-related institutions, and the linkages and knowledge-flows between them, vary significantly across economies, with important effects on innovation performance."27 In this section, we review and assess the key organizational and policy components of Thailand's NIS, including its higher education component.

A. Firms

Several studies conducted since the 1980s state that most firms have grown without deepening their technological capabilities (see Bell and Scott-Kemmis, 1985; Chantramonklasri, 1985; Thailand Development Research Institute, 1989; Dahlman and Brimble, 1990, Tiralap, 1990; Mukdapitak, 1994; Lall, 1998). A 2000 World Bank study (Arnold et.al, 2000) confirmed the weakness of technological learning on the part of Thai firms. Only a small minority of large subsidiaries of transnational corporations (TNCs), large domestic firms and SMEs have capability in R&D, while the majority still strugglewith improving their design and engineering capability. Most SMEs are concerned chiefly with building up basic operational capabilities, using craftsmen and technicians to acquire, assimilate and gradually improve fairly standard technology.

Table 5. Gross Expenditures on R&D by Sector (%)

Indonesia Malaysia Philippines Thailand1992 1992 1998 1992 1996 1991 1995 2005*

Gov't 62.0 46.1 21.9 58.8 51.2 65.3 48.8 0.04Business 33.0 44.7 66.2 21.8 25.8 9.4 11.7 0.11Higher Education

na 9.2 11.9 14.7 15.6 20.2 36.0 0.09

Private non-profit and other

5.0 0.0 0.0 4.7 7.3 5.1 3.5 0.002

Total 0.24

Source: All data, except Thailand 2005, from Felker (2003, p. 152, Table 4.5. Thailand 2005: NRCT and NSTDA; * % of GDP

Other indicators confirm this picture of technological weakness. Not only is Thailand's overall R&D expenditure low, (amounting to only 0.25% of GDP compared to 0.69% for Malaysia, 2.54% for Taiwan and 2.64% for Korea), but R&D by the Thai private sector is especially low relative (36% of the total compared t0 82% in Malaysia, 76% in Taiwan, and 70% in Korea).28 (Keep Table 5. Thailand's number of patents has also been quite low,

26 Innovation means novelty of (potential) economic value. This can take the form of new products, new processes, new sources of raw materials, new market, and new organization.27 Felker (2003, p. 138). 28 NESDB and World Bank (2008, p. 71). See also Yusuf and Nabeshima (2009, Figure 7.4, p. 164) data for 2002-2004 indicate somewhat better performance, with Thai business accounting for roughly 40% of R&D

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above those of the Philippines and Indonesia but significantly below Malaysia, whose 2004 level was roughly similar to Korea in the mid-1980s.29 Finally, Thai firms' market orientation indicates low technology levels: A 1999 Thai Ministry of Industry survey concluded that most Thai firms competed mainly at the low end of global markets, where value added and product differentiation were minimal.30 Especially troubling have beenweaknesses in supporting industries, such as plastic and metal parts, moulds, dies, and jigs, parts and mould production, whose mid-range technology and robust demand from foreign assemblers in sectors such as electronics and autos make them reasonable niches in which innovation might occur.31 As discussed below, most locally owned auto parts producers were unable to cope with the financial impact of the 1997 debt crisis and the higher performance requirements resulting from the industry's shift to export production.

The slow technological capability development of Thai firms contrasts with trajectories in Japan and the East Asian NICs. Firms in these countries moved rather rapidly from mere imitators to innovators. As early as the 1960s, Japanese firms became more innovative, invested heavily in R&D and relied less on importation of foreign technologies (Odagiri and Goto, 1993). In general, firms in Korea and Taiwan, where industrialisation (beginning with import substitution) started more or less in the same period as in Thailand, were more successful in increasing absorptive capacity (of foreign technology) and deepening indigenous technological capabilities in several industries (see for example, Amsden, 1989, Kim, 1993, Lall, 1996, Hobday, 1995, Kim, 1997). In the electronics industry, for instance, Korean and Taiwan firms were able to climb technological ladders (from simple assembly to own design and R&D), not only by initially depending on low-cost labor but also by exploiting opportunities as original equipment (OEM) and original design (ODM) manufacturers to help latecomer firms acquire advanced technology and access demanding foreign markets (see Hobday, 1995).

Comparing Thai and Korean Innovation Surveys, both conducted in 2002, illustrates differences in innovative capabilities. More than forty percent of Korean firms undertook innovation activities against just above eleven percent in Thailand (see Table 5). This could be an indication that Thai companies prefer to focus on improving production processes rather than product value, which in turn could suggest a capacity only for anOEM-oriented economy. At the same time, unlike Korean firms, very few companies in Thailand do both product and process innovations.

None of this is to deny that Thai firms in some industries have achieved significant technological capacity. But these high-performing firms constitute "pockets of vitality" that do not spill over into the broader innovation systems.32 This failure, and the general technological weaknesses of Thai firms, reflects the anaemic nature of interfirm and extrafirm linkages. A comparative analysis of Southeast Asian firms in big cities found a strong association between innovation activities and extra-firm cooperation, with Bangkok-

spending, way ahead of Indonesia (around 15%), equal to the Philippines, but significantly below China (60%), Malaysia (over 60%), Singapore (roughly 60%), and S. Korea (70%). We need to reconcile these data.29 Hong Kong , Korea and Singapore generated roughly 8-10 patents per 100,000 population annually; Taiwan generated roughly 30 patents; Malaysia 0.2-0.3; Thailand 0.07, Indonesia 0.01; and the Philippines 0.03 (Gill and Kharas (2007, p. 156). 30 Nipon and Somkiat (2001, 121).31 Doner (2009, Ch. 2).32 For a successful Thai auto parts producer, see Deyo and Doner (2000). On the "pockets of vitality" problem, see Kuznetsov and Sabel (2005, p. 4).

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based firms ranking lowest on both dimensions, Singaporean firms highest, and Penang in the middle.33 Similarly, a World Bank survey carried out in 2004-2005 concluded that the linkages in Thai firms were the "weakest technology capability component..."34 These weaknesses are in part a function of poorly conceived government efforts to connect firms, but also stem from the ability of Thai-based subsidiaries of multinational firms to accessinputs in-house and/or from parent companies.

It is one thing to describe (and to decry) a lack of technology absorption capacities and low levels of resources devoted to technology development in Thai firms. It is another to explain these overall weaknesses. In the next part of this section, we begin this explanation with a focus on government organizations and policies.

Table 5. Share of innovating companies in Thailand and KoreaThailand Korea

Innovating 11.2 % 42.8%

Product and process innovation 2.9% 21.0%Only product innovation 4.1% 17.0%Only process innovation 4.3% 4.0%

Source: Thailand R&D/Innovation Survey 2002 and Korean Innovation Survey 2002

B. Government

Inter-Agency Fragmentation:35 Thailand has created a number of government agencies responsible for science, technology and innovation (Table 6 and Figure 2). These agencies often have overlapping functions, including policy formulation, R&D implementation, R&D sponsorship, and research funding, all of which results in conflicts of interest, redundancy, and inefficient implementation. Much of the inefficiency of government stems from the power of relevant line ministries to resist both coordination and active involvement in the STI process. Political leaders been unable to restrain the proliferation of government departments; over several decades, they have failed to abolish or reorganize existing institutions when new ones were founded (Arnold, 2000: 140).

Table 6. Organisational Structure of STI Policy

Responsibility OrganisationsLevel 1 National budget approval Parliament. There are S&T Committees in both

houses of the parliament. There is no special organisation giving advices to the parliament regarding STI policy.

Level 2 High-level cross-cutting policy formulation and development

Cabinet. At the lower layer, National Research Council of Thailand (NRCT) and National Science Technology and Innovation Policy Committee (STI Committee) are the cross-cutting policy formulation bodies for the (overlapping)

33 Berger and Revilla Diez (2006).34 Felker (2009, p. 218). ?? check source35 This review is based on Bell (2003); MOSTE (2003); Felker (2003); and our own observations.

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areas of research and STI respectively. National Economic and Social Development Board (NESDB) is the most crucial governmental policy advisor and projects evaluator including S&T ones. Budget Bureau is responsible for budget allocation. These two agencies also play very significant roles in cross-cutting policy formulation process.

Level 3 Ministerial-level policy formulation

Apart from Ministry of Science and Technology, they are several other ministries involved in STI policies such as Ministry of Industry, Ministry of Agriculture and Cooperatives, Ministry Labour and Social Welfare, Ministry of Education. Ministry of Public Health, and Office of the Prime Minister.

Level 4 STI funding and promotional incentives

There are several agencies in several ministries. National Science and Technology Development Agency (NSTDA), Thailand Research Fund (TRF), and Health System Research Institute (HSRI) are granting agencies mostly for R&D. National Innovation Agency (NIA) is responsible for provide grant and interest-free loan for private firms’ innovation projects. The Board of Investment (BOI) and Revenues Department provide tax incentives for R&D investment.

Level 5 Policy implementation national centers, governmental departments such as sectoral development institutes under Ministry of Industry, universities, and Research, Technology Organisations (RTOs).

Higher Ed. and Nat'l Innov. in Thailand

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Figure 2: Thailand’s Governmental Organizational Structure for STI Policy Formulation and Implementation

OPMPublic Health

Agriculture &

Cooperatives

S&T Education Industry Labor Others

HSRI

MOST’s Policy and Strategy Office

BOI

TRF HSRINSTDA/NI

ABOI NRCT

Health Research Institutes

Agricultural Research Institutes

NSTDA DSS TISTR

Schools Colleges Universi

ties Rajapha

t & RajaMongkol Universities

Sectoral Institutes TAI TEI TGI

etc.

Social Development Fund

Training Institutes

Others

Source: Updated from Bell (2003) and MOSTE (2003)

Indeed, these weaknesses do not reflect a lack of attention to science and technology promotion. Thai efforts to coordinate efforts by the different line ministries began half a century ago. In 1956, the National Research Council of Thailand (NRCT) was created with the responsibility for planning and coordinating the country’s overall research activities. The NRCT was also responsible for reviewing proposed budgets for R&D projects across all government ministries. However, the Council lacked both financial resources, (its budget rarely exceeded $US 1 million/year), and political leverage over the line ministries.36 36 Felker (2003, p. 114).

Parliament

STI

NRCT

Cabinet

NESDB Budget Bureau

1

2

3

4

5

Level


14

In 1979, the government gathered together most of the official agencies dealing with S&T issues from other ministries to form the Ministry of Science and Technology (MOST), initially named Ministry of Science, Technology and Energy (MOSTE). The intent was that a line ministry directly responsible for S&T would give S&T a higher priority. But MOST was weakened by both overlapping responsibility with the NRCT and resistance to central coordination by its various agencies anxious to guard their autonomy despite nominal responsibility to the same minister.37 This lack of coordination was explicitly recognized in Thailand's sixth five-year development plan (1986-91).

In response, the government set up a semi-autonomous Science and Technology Development Board (STDB) in 1987. Although designed as an operational body responsible for sponsoring applied research in both public and private sectors, it was hoped that the STDB’s independent funding and industry contacts would enable it to develop a coherent agenda for industry-relevant technology development. This seemed possible in light of increased government R&D spending during the boom period and the government's decision to make the STDB permanent as the National Science and Technology Development Agency (NSTDA). But lacking the authority to coordinate the activities of other ministries, NSTDA focused largely on its own research and, to a lesser extent, industry outreach activities. In effect, the NSTDA operated less as a coordinating agency and, along with MOST, more as a Research and Technology Organization (RTO). Its three technological institutes reflect government priorities - information and communication technology, biotechnology, and new material technology - with each being the focus of coordinated efforts with universities and government public research institutions. Also problematic is the fact that “most of its sponsored projects were based on research institutions’ own proposals” rather than private sector initiatives.38

In 2001, the Thaksin government launched still another effort to strengthen the cross-cutting S&T policy process by setting up the National Science and Technology Policy Committee (NSTC). The Prime Minister chaired the committee with the Minister of MOST as the vice chairperson; its members are permanent secretaries of concerned ministries and experts in the fields of natural sciences, economics, and other social sciences and humanities. In 2008, the military government of General Surayuth enacted the Basic Law on Science, Technology and Innovation. This Law transformed the NSTC into a Science Technology and Innovation Committee also chaired by the Prime Minister, but with members upgraded to the level of ministers (politicians) and with operational support from a new, specialized secretariat, the National Science, Technology and Innovation Policy Office. As of the fall of 2009, this upgraded committee seems to have achieved little: it has held only infrequent meetings and, although nominally chaired by the Prime Minister, it is a Deputy Prime Minister assigned from a minor coalition party that leads the committee.

Mismatches between coordinating agencies and line ministries are both cause and result of agency fragmentation. On the one hand, the role of MOST in STI policy planning (and implementation) far exceeds those of core economic agencies such as the Ministries of

37 Ibid.38 Felker (2003, p. 153).


15

Industry and Agriculture, as well as the Board of Investment (Arnold, 2000: vii).39 On the other hand, the line ministries themselves have resisted developing both internal S&T capacities activities and inter-ministerial coordination.40 One government response to these coordination problems was to have Chief Science Officers in every concerned ministry to co-ordinate S&T activities and interact with the Thai NSTC.41 In practice, this initiative has not been fully implemented.

In addition to efforts at coordinating S&T promotion, there have been moves to encourage technology development by overcoming Thailand's traditional bureaucratic division between export promotion, typically handled by the Commerce Ministry, and agricultural and industrial development, typically handed by the Ministries of Agriculture and Industry. The specific proposal was to merge the Ministries of Commerce and Industry into a new, Ministry of International Trade and Development. This initiative merits special emphasis in light of findings that exposure to export pressures constitutes an important source of private sector demand for technology support. However, the merger never happened as turf battles between the two key ministries, backed by political-business interests, blocked the effort.42

Still another division, (noted in the firm surveys reviewed below), occurs between theagencies responsible for the overall R&D environment (MOST) and for S&T manpower policies (Ministry of Education). In Section VI of this paper we highlight the ways in which coalitional dynamics help to explain inter-agency fragmentation.

Funding and Incentives: The fragmentation described above, along with other problems, has undermined funding and incentives devoted to technology absorption and development (Table 6). In some cases, the sums were simply too small to make much of a difference: MOST's soft-loan program amounted to only $1.2 million/year between 1984-1994; and NSTDA's grant and soft-loan schemes involved a small percentage of the Agency's overall budget .43 Equally problematic was weak coordination among RTOs, such as NSTDA, state financial authorities, and private financial institutions: The Thai Budget Bureau required that agencies implementing technology subsidies subcontract loan administration to local commercial banks who in turn "imposed commercial standards in screening loan proposals, and rejected some applications by SMEs for lack of collateral, even after the implementing agencies (MOSTE and NSTDA) had already approved proposals for their technological merit."44 Still another problem was that these schemes were typically not tailored to the particular needs of local firms.

The Thaksin government made at least two efforts to address these issues.45 First, in 2003, the goverment merged of some financial schemes into the National Innovation Agency(NIA). But the NIA failed to perform the needed role of financial intermediary to support innovation. Rather, it focused on public relations, especially to educate firms and Thais on the importance of innovation. The second and more significant initiative was to move the

39 This imbalance contrasts with the relatively successful coordinating roles of Korea's Economic Planning Board (EPB) (see Chang, 1997), and Taiwan's Ministry of Economic Affair (MOEA) (see Lauridsen, 1999).40 Bell (2003). 41 See S&T Strategic Plan 2002-2006.42 Doner (2009, Ch. 4). 43 These evaluation is drawn from Felker (2003, p. 154).44 Felker (2003, p. 154). 45 Unless noted, this discussion is based on Lauridsen (2009, p. 422).


16

Board of Investment from the Office of the Prime Minister to the Ministry of Industry. Somewhat similar to the earlier-noted effort to merge the Ministries of Commerce and Industry, this initiative was designed to link incentive schemes to industrial policy as a whole, and to encourage the BOI to shift from a focus on jobs, foreign exchange and physical capital to skills, technology and innovation. Yet despite the move, a senior BOI officialnoted in early 2009 that the Board still lacked basic information on companies receiving incentives.46

Weak Evaluation: This fragmentation has blurred distinctions between policy formulation, implementation, evaluation, and funding.47 There are few ‘contractual’ relationships between agencies performing policy formulation and those performing policy implementation: those that formulate policy rarely have to compete for funding with those that implement policy,nor is either party accountable to the other for its performance. As a result, evaluation is sporadic and based on varying approaches and degrees of transparency. The only chance for implementation and monitoring to work, then is for one agency to do both tasks. For example, the NSTDA, formulates policy (as the interim secretariat of NSTC) and helps finance R&D and other technology development activities while also carrying out R&D.48

But even in this case, evaluation is not independent and therefore often lacks credibility.

In the past few years, there have been attempts to draw clearer lines between policy formulation and implementation and to strengthen the S&T evaluation processes. As mentioned earlier, the secretariat office of NSTC, now the STI Committee, has been established as an independent public agency separated from NSTDA (which now mainly focuses more on S&T implementation, especially research). New, performance-based budgeting has been introduced to make government agencies more accountable. Contractual and delegation relationships have been formed. The NSTC has also appointed a respected person from the private sector to lead the Evaluation Subcommittee responsible for organizing the evaluation of key S&T projects initiated under the S&T Strategic Plan 2002-2006. In practice, the impact of this change has been minimal. Actual ex-post evaluation by has been carried out not by external evaluators but largely by internal staff at the NSTC. The results are then presented for approval by the subcommittee.49

The difference between Thailand and the East Asian NICs is thus not the absence of institutions in Thailand or the top-down bureaucratic structure found in the NICs. Thailand’s NSTC is structured similarly to Japan’s Council for Science and Technology Policy, Taiwan’s National Science Council, and Korea’s National Science and Technology Council. Yet despite apparent structural similarities, the Thai NSTC operates dramatically differently from its East Asian counterparts. The chairman of the CSTP of Japan and NSTC of Korea isthe prime minister and the president respectively. The meetings of Japan CSTP are scheduled 46 Comments at the “Politics and the State in Economic Upgrading.” Thailand Development Research Institute, Bangkok. January 28, 2009. 47 E.g. Bell (2003, p. 30).48 In Korea and Taiwan, there are clearer division between the policy formulation, funding, and policy implementation, and evaluation is also an integral part of S&T policy process. On the role of the Korea Institute of S&T Evaluation and Planning (KISTEP), see Shin (1999).49 This contrasts with, for example, Japanese practices in which Basic S&T plans are evaluated by an external organization at project, program and policy levels. Surveys are sent to both concerned domestic researchers and overseas researchers. The process also involves case study analysis (Kondo, 2006).


17

every month and the executive members meet every week, In contrast, meetings of Thai NSTC happened every 4-5 months and while the prime minister is the ostensible head, he rarely participates. Thus, despite similar constructions, these institutions functioned with different levels of capacity, resources, and urgency.

Government-Business Linkages: Weak, particularistic and/or sporadic links with firms have contributed to the government's poor record in helping to identify, encourage, and facilitate the growth of local technological capacities. Consider, for example, links with business associations. Thai associations have historically played very important roles in a number of areas, ranging from risk socialization, to standard enforcement in agriculture, to improvement in trade administration, to resolving overcapacity problems, to overcoming imperfections in labor markets. Yet the associations have been much less involved in and successful at productivity and technology promotion. This is in part a function of the weaknesses in the Federation of Thai Industries, the peak association most relevant for innovation. The FTI is relatively fragmented, not wholly representative of key manufacturing exporters, and somewhat politicized.50 Given the importance of organized business for a NIS, it is important to specify what does and does not explain the weaknesses of Thai associations noted above. The underlying problem is not some cultural antipathy to cooperation. Indeed, as noted above, Thai businesses have historically exhibited very significant levels of cohesion in numerous areas, albeit not those focused on technology absorption and development. The problem lies rather in the incentives for organization provided by political leaders. Historical and cross-national research demonstrates that organizing a business association is a collective action problem, one whose solution requires not just perception of need by firms but also support by government leaders. As Schneider argued in the case of Latin American associations, "states organized or disorganized business" through a combination of threats and side payments (including privileged access as well as financial incentives).51

In the Thai case, government agencies did little to "organize" business for technology and innovation. Weak government support was, as we emphasize below, in large part a function of politics - namely, coalitional and thus ministerial instability. Not surprisingly, then, consultation between government and business "rarely focused on technology issues...and have done little to shape coherent public technology strategies...." 52 The two cases of technology-focused consultation proved short-lived.53 During the 1980s debt crisis, the government established a high-level Restructuring Committee (RESCOM) operating under the National Economic and Social Development Board to address the weak competitiveness of Thai firms. RESCOM conducted sectoral background studies but the government dropped the effort as macroeconomic measures and the return of foreign investment flows helped to resolve the crisis. In response to the 1997 crisis, the government initiated an Industrial

50 On a recent battle for FTI presidency, see "It's an all-out war," The Nation, (January 21, 2010). It bears emphasis that this fragmentation mirrors the structure of government coalitions (see below). On Thai associations more generally, see Anek (1992) and Doner (2009, Ch. 4). 51 Schneider (2004, 5).52 Felker (2003, p. 144).53 Doner (2009, Ch. 4).


18

Restructuring Program in which the Ministry of Industry organized extensive consultations with associations and sectoral representatives. The meetings were designed to help upgrade 13 sectors through 8 sets of measures ranging from equipment modernization to labor skills to product design. But a few years later, a senior MOI official labeled the IRP a failure; the sources of its failure merit note:

The capacity for the kinds of coordination and information gathering required to monitor and evaluate was undermined by weak business association involvement in the IRP process. This problem was reinforced by ministries' reluctance to give up resources to the quasi-autonomous institutes designated to help implement the project. Bureaucratic turf defense and leadership instability remained problems....(the leader of the effort in the MOI)...worked under three different Industry Ministers, each of whom had a somewhat different set of reform preferences. As a result, many of the projects were selected to match the preexisting wish-list of various agencies, especially the MOI. This undermined the coherence of the sectoral reform packages, discouraged "ownership" by other agencies, created confusion in financial disbursements, and further undermined evaluation and monitoring. In fact, pressure from officials monitoring the IRP led to more favorable project evaluations than actual project outcomes warranted. 54

Such efforts were especially important in light of gaps left by research-oriented RTOs. As noted earlier, MOST and agencies such as NSTDA were designed as broader coordinating bodies but ended up essentially as research-oriented RTOs. But because their research activities were largely internally driven, there "was no guarantee that the RTOs actually matched private sector needs and demands for support."55 Those links that did emerge were largely ad hoc and devoted to firm-specific troubleshooting rather than sectoral technological capacities. Equally problematic, they were oriented more to R&D than to the more advanced technical competencies required by most Thai firms.

One effort to address this gap involved the creation of semi-independent industry "Institutes" operating under the MOI in sectors such as textiles, electronics, automobiles, metalworking and machinery. These were essentially service-oriented organizations designed to address technology-related competency shortages in areas such as skills shortages and testing and standards (more on these below). Despite significant efforts by committed leaders, these organizations have been weakened by disagreements over (government vs. private sector) financing and control and by half-hearted participation by multinational corporations.Subsequent efforts by the Thaksin government to consolidate and strengthen the Institutes were, like the effort to merge the Industry and Commerce Ministries, either blocked or delayed by bureaucratic and factional interests.56

Thai governments have also undertaken efforts to coordinate technology development with the multinational corporations who dominate many of Thailand's manufactured export sectors. Along with the Industry Ministry, the BOI launched a series of initiatives to upgrade local suppliers, including the BoI Unit for Industrial Linkage Development (BUILD) in 1991, a National Supplier Development Programme in 1994, a multi-agency effort to develop small

54 Doner (2009, p. 129).55 Lauridsen (2009, p. 416).56 Felker (2003, p. 161); Doner (2009, Ch. 4); Lauridsen (2003, p. 416).


19

and medium-enterprise suppliers, and a 1995 Master Plan for the Development of Supporting Industries in conjunction with the Japan International Cooperation Agency.57 These efforts were largely ineffective. BUILD failed to create incentives for multinational firms to sufficiently mentor newly formed Thai companies dependent of sustainable upgrading.58 Thai firms experienced high mortality rates not just in the aftermath of the 1997 crisis but also in the subsequent shift to full-fledged export competition. The BOI lacked the sector-specific expertise, as well as the political support, needed to formulate, much less monitor, the supplier development efforts. As a result, the Board subcontracted many of its match-making functions to consultants. The efforts were also stymied by conflicting policies: Even as it talked of promoting local suppliers, the Board allowed foreign-owned firms to sell all of their output in the domestic market (up from 20% in 1991) and intensified a campaign to attract investments from Japanese SMEs. Public policy on supplier development thus lacked credibility.59

C. Financial Intermediaries

Thailand’s financial system supporting industrial development is primarily bank-based. This system has proven tremendously effective in helping to diversify the Thai economy by channelling capital to new sectors. It has been significantly less effective in fostering innovation and the development of local technological capacities. A 1997 MOI survey identified difficulties in obtaining loans as the major obstacle to local firms' efforts in innovative activities.60 These difficulties reflect three types of problems in the financial component of Thailand's NIS.

First, as noted above, coordination between official agencies implementing technology subsidies and subcontracting commercial banks is weak.

Second, industrial development banks--especially the Industrial Finance Corporation of Thailand (IFCT), SME Bank, Small Industry Credit Guarantee Corporation (SICGC), and Innovation Development Fund (IDF, which was subsequently transformed into the National Innovation Agency or NIA)--established to provide long and medium term financeappropriate for innovation, have not evaluated risk and invested effectively. Some of these financial institutes are not well known to private firms and are not efficiently operating because of chronic bureaucratic red tape. While the maximum loan limit under the programmes is rather low, interest rates are similar to those charged by commercial banks. The application and loan processing activities are complicated and time-consuming, in many cases taking several months to complete. This discourages firms, especially SMEs, from seeking institutional loans and forces them to take loans from informal sources where, although they can get credit more quickly, also costs them more (The Nation Newspaper –various issues, The Bangkok Post – various issues). In one case the IDF found it difficult to approve funding for start-up firms’ innovative projects because project evaluators, mostly

57 See Doner (2009, Ch. 4). 58 Ritchie (2010)59 Lauridsen (2004). 60 Advanced Research (1997).


20

university professors, lacked understanding of the firm’s innovation processes and capability.61 But despite its weakness in lending, the Fund has performed well as a promoter of a new “innovation culture” in the private sector and Thai society at large by making awards to firms that exhibit innovative behavior.

Third, Thailand lacks capital markets designed especially to promote high-tech start-ups like those found in Japan (JASDAG, NASDAQ-Japan, and MOTHERS), Korea (KOSDAQ), and Taiwan (TAIDAQ and TIGER). The Market for Alternative Investment (MAI) is a business unit of the main market, the Stock Exchange of Thailand (SET). It was set up in 1999 as a new secondary market for trading SME shares. MAI’s requirements for initial public offering have been adjusted to allow SMEs flexibility in entering the capital markets. However, this market is not specifically aimed at promoting knowledge-intensive start-ups. In practice, MAI gets little interest from SMEs because the founding shareholders are reluctant to enact common stock rights issues that would effectively dilute their stakes in the listed companies. Since most SMEs are family-controlled, this reduces the willingness to enact equity issues (for fear of diluting levels of ownership and control). Therefore, the capacity of MAI as a conduit for small businesses is constrained. Moreover, many SMEs see that the MAI requirements tend to disqualify most small and medium–sized enterprises, for being below the minimum capitalisation level. As a result, there are too few outstanding shares to trade adequately on the market.62

Both the private sector and government has taken steps to address the void in venture funding. In 1994, the Thai Venture Capital Association (TVCA) was created to help firms get their economic fundamentals in place necessary to access financial markets. Approximately half of the Thai Venture Capital Association (TVCA)’s members are Thai and international Venture Capital and/or Private Equity Fund Management firms. The other half are firms that support VC or Private Equity firms, such as financial advisory firms, accounting firms, legal firms, securities firms and finance companies. The Thai government has also taken steps to improve access to capital, primarily by supporting the creation of several VC funds, such as the SME Venture Capital Fund (THB 1 billion), the Thailand Equity Fund (US$50 million) and the Thailand Recovery Fund (US$250 million). The government also gives tax incentives to promote more VC investment in Thailand.

But even with these efforts, Thailand’s venture capital lags its East Asian neighbors, both in terms of growth of venture capital and the number of firms receiving financing for innovation and knowledge-intensive start ups. Equally troubling, the venture capital investment that does exist in Thailand tends to finance firms at an expansion or mezzanine stage rather than in the early start-up phase like in Taiwan. 63 These capital market deficiencies might not be one of the biggest constraint on innovation at when local technological capabilities are weak and there are few knowledge-intensive new entrants. But they will increase in importance if Thailand wants to upgrade from its current low-wage industrial development strategy based on natural resources to a high value strategy based on product differentiation and innovation.

61 Turpin et.al, (2002: 73).62 Freeman (2000).63 See “Taiwan Venture Capital Association”, (n.d.)


21

D. Higher Education: Universities and Technical-Vocational Institutions64

Problems in Thailand's institutions of higher education are major contributors to the technological weaknesses reviewed above. This section emphasizes the supply side of the picture, highlighting problems in universities, the vocational and technical training system, and university-industry linkages.

1. Pre-WWI Origins

In 19th century Asia, Thailand was, along with Japan, a leader in education reform. Indeed, the creation of the modern Thai state in the mid-late 19th century prompted predictions that Thailand's economic growth would rival that of Japan's newly-established Meiji state (Feeny 1998: 6). As in Japan, early pressures for reform were prompted by external threats: Aware of colonization of its Southeast Asian neighbors by western powers and faced with unequal trading laws imposed by the same countries, Kings Mongut (1851-1868) and Chulalongkorn (1868-1910) implemented far-reaching institutional reforms aimed at strengthening the kingdom of Siam. In 1887 Chulalongkorn established the Thai Department of Education, a unit subsequently upgraded to the ministerial level. General education was provided to the public but focused on manual, occupational training. During the reign of King Wachirwut(1910-19xx), the country began consolidating and formalizing its educational system. The Educational Scheme of 1902 divided education into two categories: general and special or technical. In 1909 the two streams were renamed academic and vocational. In 1916 Chulalongkorn University, the first university in Thailand, was founded. In 1921, Siam became the second country in Asia, after Japan, to implement universal compulsory primary education (Cleesuntorn, 1987; Sukontarangsi, 1967). Thus, just prior to the worldwide depression, Thailand - to the casual observer - appeared to have developed a solid education and training foundation equal to any other country in Asia.

But the comparison with Japan highlights as many contrasts as similarities. The Meiji oligarchs came to power in 1868 and by 1872 had initiated a program of mass education to provide the popular basis for both a large army and a national polity. In contrast, Chulalongkorn, who also ascended the throne in 1868, didn't set up a Ministry of War until 1894, failed to introduce conscription until 1905, and made no attempt to link education to military requirements. In fact, as noted, modern primary education was not compulsory in Siam until well after 1910, and even then it was far from universal for several decades.65 Further, Siam's early reforms focused on citizenship and nation-building, not on technological competence. The expansion of primary schooling drew heavily on the traditional wat (temple)-based system and stressed the Central Thai language, arithmetic and Buddhism (Pasuk and Baker 2005, p. 66-7).

64 Unless otherwise stated, this section draws heavily on Ritchie (2010).65 By the early 1900s, literally all Japanese children were completing primary school and moving into a national structure of secondary and tertiary institutions. In contrast, the Thai government "was happy to announce in 1957 that in 14 or 71 provinces more than half the population had completed primary education" (Anderson 1978, 201).


22

Similarly, higher education in Siam emerged much later than in Japan (the creation of Chualongkorn University in 1916 came four decades after Japan's Imperial University); and during this early period, access was limited to students of royal or noble birth and focused primarily on general training of civil servants and military officers. For higher-level technical expertise, the government drew on foreign advisors. Indeed, Brown argues that Siam's education reforms "did not seek to produce, by heavy investment in a modernizing education system, the trained labour-force that would be demanded by an industrializing economy..." (Brown 1992, 134).

One might object to this evaluation by noting that late 19th-early 20th century Siam was largely agricultural. But the country's system of higher education was weak even in agriculture. James Ingram, the preeminent historian of Thai economic history, noted that while the government did succeed in railroad construction and irrigation works, it

did little or nothing to improve the methods of cultivation and seed selection; it did nothing to improve the marketing structure or to standardize the quality of the grades of rice; it did not study soils and crops; nor did it effectively perform the function of informing the farmers about prices and marketing alternatives. Much more could have been accomplished in all these things, and without very large expenditures, too...The nation would also have benefited from a more adequate system of irrigation works....66

It is worth emphasizing that these weaknesses were not for want of ideas. In fact, the government explicitly rejected not only a well thought-out proposal for a large-scale irrigation project, but also a program, based on several years of research and development in Siam by Japanese experts, to promote and improve silk production; a proposal to expand cotton cultivation; and projects involving fertilizer, fruits, and information collection and diffusion. The failure to collect information highlights the failure to invest in productivity-related institutions: Specialized journals were launched and then dropped; statistics on key issues such as rainfall, production and prices were kept only sporadically; the Dept. of Irrigation was abolished in 1912, only to be reestablished after large-scale flooding a few years later (Ingram 1955, 83); and agricultural extension services were modest at best.

Overall, "the government was not successful in building institutions which would help to develop and diffuse productivity increasing technical change in Thai agriculture" (Feeny 1982, 54; 52). Indeed, the lack of concern for such institutions is reflected by King Vajiravudh's response to an appeal (by a Siamese prince who had completed a doctorate in Germany about Siamese agriculture) that the government promote education for farmers and research on agricultural technology: The King reacted by banning the study of economics(Pasuk and Baker 2005, p. 88). The government did create a Bureau of Agricultural Science in 1923 and subsequently a new agricultural school modeled after a Japanese institutions. But by 1930 the new school had failed miserably (Brown 1988).

Nor were there any efforts to build technological capacities in manufacturing, even when linked to existing comparative advantage. There was no support for domestic production of

66 Ingram (1955, p. 87).


23

agro-related goods, such as pumps or gunny bags for rice transport, or for further innovation in rice mills despite clear evidence of local technical competencies.67 And although the royal-sponsored Siam Cement Co. was highly successful in construction materials, especially cement, the government abandoned the idea of expanding into more complex construction equipment and shipbuilding (Ibid). Instead, higher education in this early period focused on “the virtuous life” and how to achieve it (Cleesuntorn, 1987).68

None of this is to deny significant progress: The government helped finance and organize railroad and (limited) canal construction; it supported cement production and important agro-processing operations such as sugar mills and rice mills; and its reform of property rights facilitated the expansion of rubber production and, of course, rice cultivation by small, independent owner-farmers. Thai success in rice exports is especially striking: Whereas rice exports from Burma and Indonesia stagnated, Thai exports rose 25-fold from the middle of the 19th century to the middle of the 20th century.69

But the emphasis of Siam's early reforms was internal consolidation and revenue collection. As discussed below, the former did not require a modern military;70 and the crown had access to revenue sources that required little technological innovation. The state pursued what Pasuk and Baker (1995, 45) label a "low-capital, low-tech" regime. Reforms were limited to what, in King Chulalongkorn's own words, were the "safe models" of the colonial controlled areas the young king actually visited: Singapore, Batavia (Jakarta), and India. As Anderson notes,"...the young sovereign never made a comparable trip to Japan" (1978, p. 200).

This inattention to technology and related institutions continued even after the abolition of the absolute monarchy in 1932 by the People's Party. The new government did expand financing for education, raising the number of primary schools from 0.7 to 1.7 million during the 1931-39 period. But proposals for agricultural improvement and industrial developmentthat would have stimulated the creation of technical institutions were rebuffed by a combination of aristocratic resistance and Thai nationalist suspicion of Sino-Thai power.71 The post-1932 government also established a new university, Thammasat (University ofMoral and Political Sciences). But as its name suggests, the emphasis of this effort was not on technology but on training officials and developing new legal codes that would weaken aristocratic privilege, help Siam negotiate lower interest rates for foreign loans, and facilitate the revision of the unequal treaties to which the country had been subjected.72 Even this institutional expansion does not seem to have spurred much human capital growth: "Until

67 Feeny (1982, p. 53). By the late 1800s, Sin-Thai mills had largely supplanted European operations (Brown 1998, p. 205). 68 Even now as the education infrastructure is reformed religion has been reunited with education and culture as the three pillars of society (see the education act of 1999).69 Ingram 1955, 37).70 Military conscription began in 1905 as an effort to extend the state's power into former tributary states, not to confront the West. The military's lack of technical expertise is reflected in its early dominance by the aristocracy and the "packing of the War Ministry with royal adolescents" (Anderson 1978, p. 207). 71 Pasuk and Baker (2005, pp. 122-123).72 The treaties were revised in 1937-38.


24

World War II, the best secondary schools were administered by Europeans, and university deans were often Europeans."73

Up to WWII, then, the country's economic structure (and its related educational institutions)had changed little. Writing in 1955, Ingram emphasized Thailand's paucity of internally generated innovations and its passive but market-conforming responses to shifts in the world economy:74

The Thai population has largely remained in agriculture, and has neither improved techniques nor increased the proportion of capital to labor. Moreover, most changes in the economy...have been in volume rather than kind. New methods have not been used, new products have not been developed. No product of any importance (besides rubber) is exported today which was not exported in 1850.75

2. Post-WWII Expansion

Thailand's educational system grew significantly after WWII. Part of this reflected a general extension of the state's administration to accelerate the pace of land titling, an effort that resulted, for example, in the creation of a new surveying school to provide qualified personnel.76 Even more important were other factors increasing the demand for educated personnel: the country's gradual shift to manufacturing, the emergence of new social groups,Thailand's close, security-based link with the U.S., and the creation of a bureaucratic infrastructure devoted to macroeconomic stability and FDI promotion. Together, these factors stimulated what Anderson labeled a "massive expansion of education at all levels:" Between 1964 and 1969, the number of students enrolled in government secondary schools increased from over 159,000 to over 216,000, and in government vocational schools from 44,000 to over 81,000; and in 1961, 15,000 students attended a total of five universities compared with 100,000 enrolled in 17 universities in 1972.77 Indeed, accelerated industrialization in the 1970s led to a labor shortage in science and technology that in turn prompted the creation of open universities and distance learning institutes.78 Continued expansion resulted from the industrial boom of the 1985-95 period. The last quarter of the 20th century witnessed the growth of education's share in the national budget (from a sixth to a quarter), the opening of new private and public colleges, as well as a significant rise in the

73 Wilson (1962), cited in Anderson (1978, p. 201). 74 The market-conforming changes involved the growing use of money, increased specialization and exchange, and the growth of a racial division of labor (Ingram 1955, pp. 216- 217).75 Ingram (1955). And even the development of rubber in southern Siam was the result not of intentional promotion but of the externalities of security-oriented railroad construction and Malaya's expanding rubber cultivation (Stifel 1973).76 Larsson 2009, p. 14) who shows the truly impressive expansion of land titling and innovative (for Thailand) approaches to cadastral surveys.77 Anderson (1977, p. 16). This expansion was supported by an increase in the relative size of the Education Ministry's budget from 4.6 of the total budget in 1958 to 13.2 in 1967. However, the percentage then declined to roughly six percent in the next five years (Ibid., p. 26, fn 34). 78 Schiller (2006a).


25

numbers of Thais getting educated in the U.S. By 2006, Thailand had 20 public, four autonomous, and over 50 private universities.79 The result was a 20-fold rise in the numbers with tertiary education (reaching 3.4 million) and a 10-fold rise in the numbers with secondary or higher education (reaching 10 million) over this period.80

The benefits of this growth are clear: Expansion in literacy and basic skills helped meet the growing demand for workers capable of operating in modern factories.81 Graduates of the growing number of universities initially became officials; but as the expansion of bureaucratic positions slowed in the 1980s, most became "professionals, technicians, executives, and managers in the commercial economy."82

But the focus on the commercial economy in the preceding quote reflects the weaknesses of Thailand's expanding higher education system. By the mid-1990s, the system exhibited several important flaws.83 First, low-income and rural citizens generally lack access to higher education. Second, the focus of secondary curricula tends to be on university preparation rather than on actual labor market requirements for vocational training. Third, the research performance of Thai universities is substandard both in terms of industrial needs and sheer numbers. With regard to industry needs, Schiller notes that research in Thai universities and research institutes "is done for the private sector, but not in interaction with it." In terms of numbers, one statistic - numbers of publications listed in the Science Citation Index (SCI) -is disturbingly illustrative: In the 1980-84 period, Thailand's SCI publication total of 394 exceeded those of Korea (341) and Singapore (253); by 1985-1989, the Thai figure had risen to only 446 compared to 1,043 for Korea and 597 for Singapore; by 2000-2005, the Thai figure was 2,059 compared to 21,471 for Korea and 5,177 for Singapore. 84

Fourth, Thai universities produce a small number of engineers, (with the exception of civil engineers) relative to the industrial sector's needs.85 This partly reflects the fact that Thailand's university expansion "has been driven by open and private universities which have a higher student-teacher ratio and concentrate on humanities and social sciences" (Schiller and Brimble 2009, p. 69). Finally, it appears that the "efficiency" of Thai universities, measured in terms of postgraduate placement, is weak. The ADB found that while some 90% of graduates from Thai postgraduate programs landed jobs, the overwhelming percentage were in universities or public agencies, not the private sector.86

79 Schiller (2006a). The rapid growth in the number of private, compared with public universities is in part the result of the need for parliamentary approval to establish the latter. . 80 Pasuk and Baker (2005, p. 207; 220). Some 7,000 Thais attended U.S. colleges The number of Thais attending U.S. colleges and universities rose from a few hundred in the 1950s to 7,000 by the early 1980s (Ibid., p. 151). 81 By 1985, Thai literacy had reached 91%, the highest among the ASEAN countries (Muscat 1994, p. 239). 82 Pasuk and Baker (1995, p. 207). 83 See, e.g. Muscat (1994, p. 240); Schiller (2006a). 84 The Thai figure was, however, well higher than Malaysia (1,221), the Philippines (474) and Indonesia (524). Schiller (2006b, Table 3, p. 23). 85 Christensen (1993, pp. 132-133). The emphasis on civil engineering reflected the country's traditional focus on infrastructure development.86 For Ph.D.s, the figure was 78%, with only 11% in domestic industries. For M.A. graduates, the placement was much better: 39% in domestic industries; 27% in universities and government agencies. ADB (2006).


26

In fact, the paucity of technicians and engineers has long been a focus of Thai efforts in two areas reviewed below: 1) to deepen and rationalize technical / vocational education and 2) to encourage greater university responsiveness to market needs through university autonomy.

Technical and Vocational Education Training (TVET): As the economy transitioned from agriculture to manufacturing, reform efforts concentrated on developing and expanding the vocational education stream within higher education. Since there was little indigenous capacity for the needed technologies to train new manufacturing workers, Thailand relied on partnership relationships with more developed countries. In the 1950s and 1960s the result was a series of Thai-foreign-country partnerships with France, Germany, and Japan, each focused in particular areas of expertise, such as automobiles, electronics, precision engineering, and so forth. But while these initiatives did expand the pool of technically trained human capital, they focused primarily on the needs of specific foreign MNC industries, making it hard to transfer skills to the broader Thai economy. Unlike Singapore, Thailand lacked indigenous demand and appropriate government policy mechanisms—such as Singapore’s Local Industrial Upgrading Program (LIUP) where engineers from MNCs were employed to train local engineers and technicians on specific skills important for industrial upgrading.87 Thus, newly trained workers were fit only for a limited number of jobs in foreign companies and spillover impacts to the rest of the economy were limited.

New efforts to expand the supply of technically trained workers were begun in the early 1970s. Vocational education was split off from university education and a new Department of Vocational Education was created. The department built and certified many new public and private vocational schools, resulting in a boom of vocational school graduates. These graduates, coupled with a growing number of university graduates, matriculated into the labor force at the same time. Again, however, the underlying demand was not driving the expansion. Rather, pressures to find jobs for an expanding number of adolescents made it imperative for the government to create new jobs to maintain social order. In the end, only about 25% were able to find jobs in the rural areas and 50% in Bangkok.88

The mismatch between vocational and university graduates and new job opportunities persisted until the mid 1980s, when the boom in foreign direct investment began to dramatically increase demand for engineers and technicians to work in the growing number of foreign-owned manufacturing operations. But now that demand was more in line with numbers produced, the problem was that the graduates lacked the skills and abilities needed by the firms. The situation still had not improved during the time leading up to the 1997 financial crisis. As late as 1995, Thailand graduated 61 students with advanced degrees in science and engineering. From this number, two were engineers of any type, seven were agricultural scientists, and 23 were doctors. In 1996 two were engineers, 13 were agricultural scientists and 21 were doctors. In 1997 the numbers were three, 10, and 11, and in 1998, two, 11, and 23. Enrolment data did not augur much improvement. In 1995, 54 percent of tertiary students were enrolled in science and technology fields and 46 percent enrolled in social sciences. In 1996 the ratio was 40% to 60%. Although the numbers recover in 1997 and 1998

87 Wong, (1995)88 Anderson (1988, 156, fn. 50).


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to 42% to 58% and then 51% to 49%, the bulk of the increase in science and technology enrolment is in medicine and medical related fields.89

89 NSTDA (unpublished data).


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Figure 3: Pre – 1999 Vocational Training Fragmentation

A major supply-side source of these weaknesses was a factor emphasized earlier: bureaucratic fragmentation. As seen in Figure 3, several different ministries wereresponsible for some aspect of education and training, each controlling its own budget, curricula, teachers, etc. This arrangement translated into extensive duplication, gaps, and a lack of coordination. For example, the Ministries of Education, University Affairs, and Interior were officially under the purview of the National Education Commission (NEC). But the NEC not only lacked jurisdiction over training in the Ministries of Labor, Industry or Agriculture; it also proved incapable of coordinating the three ministries ostensibly under its own jurisdiction.90

The 1999 Education Reform Act aimed to rationalize this chaotic system through two broad steps. One involved integrating supervision of all technical education by merging the Ministry of University Affairs (and thus tertiary, degree-granting institutions) into the Ministry of Education and by upgrading the Department of Vocational Education (DOVE)into the Vocational Education Commission. The second involved bringing all vocational training into the Ministry of Labor (formerly named Ministry of Labor and Social Welfare).

Despite this move, the system remains plagued by fragmentation and by bureaucratic rivalry, especially between the Ministries of Labor and Education. In addition to former teacher

90 Ritchie (2005).


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colleges and polytechniques (Ratchapat and Ratchamonnkol) that graduated to tertiary degree-granting status in 2005, there are over 500 vocational schools in Thailand. These are divided into polytechnique schools, vocational schools, technical colleges, agricultural colleges, and vocational colleges. There are, in addition, several Army training colleges, vocational schools under the Ministries of Health and Sports, some 76 technical skill center institutes controlled by the Ministry of Labor. Finally, the Ministry of Education established some 20-30 community colleges.91

Reflecting and exacerbating this fragmentation has been a lack of funding mechanisms through which to encourage private sector contributions to TVET and of unified certificationstandards Following the 1997 crisis, efforts to establish a skill development fund bogged down in the face of vested interests in both public and private sectors, which led to real differences as to the program's design. Although the Ministry of Labor proposed the program design after those in Korea and Singapore, the Prime Minister’s office, with support from local industry, opposed the mandatory levee, proposing instead that funds be collected only from firms that it could be proven were not training. This opened the door for political favoritism between politicians and businesses. In the end the program was simplified dramatically into a tuition re-imbursement program.

Efforts to encourage firms to train did not end with the failure of the skills development fund. But no future programs approached the same level as the fund with respect to forcing businesses hand to train and upgrade worker skills. Instead, most of these programs, including the Finance Ministry's Decree on Tax Reduction for Training Cost and the 2002 Skill Development Promotion Act, focused on tax rebates for firms that were conducting training. However, the participation levels in these rebate programs has been always been limited given the difficulty of claiming the tax rebate (Ritchie 2010). 92

In 2004, a significant upgrading initiative was implemented by the BOI under a special investment package promoting “Skill, Technology and Innovation or STI”. Firms can enjoy one or two years extra tax incentives if they perform the following activities in the first three years: spend on R&D or designing to the tune of at least 1-2 percent of their sales, employ scientists or engineers with at least a bachelors degree to comprise at least 5% of their workforce, spend at least one percent of total payroll on training employees, and spend at least one percent of total payroll on training personnel of their local suppliers. Though the number of firms using such incentives are not large, it is increasing. Up until July 2009, 130 projects with a total investment of over 87,000 million Baht under the STI scheme had been approved.93

To consolidate the standards infrastructure, the government created the Thailand Vocational Qualification Institute in 2003 and resurrected the National Commission on Vocational Training and Coordination, which was ostensibly moribund but reactivated in 2007. But this

91 Interview with Ray Grannall, ILO Consultant, May 27, 2006.92

see also the ILO’s web site at http://skills-ap.ilobkk.or.th/resources/national-tvet-systems for more information on skills development in Thailand.

93 Data from Office of Policy and Strategy of the BOI obtained by the authors.


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and other efforts stagnated, despite support from the FDI and automotive sector. The consolidation and strengthening of competency standards were opposed by both the Ministry of Labor, which claimed jurisdiction over certification standards, and by powerful interests engaged in private training. The latter were concerned that new standards would improve the quality of publicly supplied training and impose tough pressures on their operations.94 Without government collaboration, MNCs have not made use of local collective institutions, despite evidence they were willing to do so. As local politics have impeded the creation and operation of such institutions, MNCs have chosen to “go it alone.”

University Funding, Autonomy, and Reform: The levels and structures of funding in Thailand have contributed to weak performance in higher education. Writing in 2006, Schiller concluded that government funding for higher education had stagnated as a portion of GDP, as a portion of government expenditures, and as a portion of education spending overall.95 In addition, funding tends to be based on new study programs and research units and on the bargaining power of each institution. Further, the accounting methods used by the universities make monitoring difficult. The Thaksin government proposed several revisions, including more demand-based funding, a different budgeting system, and more performance-based indicators. But the most important reform was support for university autonomy.

The 1999 Education Reform Act mandated that all universities become autonomous within the next five years. Making universities autonomous from the civil service had been part of the ongoing reform debate as far back as the 1970s. Without autonomy, reformers argued,universities would lack incentives to demand high-quality research and teaching fromfaculty. Without a change in the incentives and focus of the faculty, universities were likely to remain disconnected from the needs of the private sector. Demands for autonomy, however, were resisted heavily by the faculty. This should not be surprising given the core historical fact that traditionally, Thai higher education has been "closely bound to the government bureaucracy."96 Although hotly debated for several decades, the economic collapse of the late 1990s provided sufficient support for the educational reform act of 1999 to mandate the change.

At present, there are nine autonomous universities in Thailand. King Mongut University of Technology, Thonburi (KMUTT) was the first one to change its status to autonomous university in early 1990s. Subsequently, three new universities were established as autonomous universities: Suranaree University, Walailak University and Maefahluang University. In 2008, five more established universities moved to autonomous status: Chulalongkorn University, Mahidol University, Burapha University, Thaksin University, and Chiangmai University. It is worth note that the transformation of five established universities to autonomous status happened during military-back government following a coup.97 This 94 The result is that different schools oeprate courses designed to accomplish the same training but deliver different, albeit substandard results. In Chiang Mai, for example, both the vocational college and technical school teach welding, but neither meets industrial standards, coordinates with each other, or consults with local firms. Granall interview. 95 Unless noted, the following draws on Schiller (2006a). These data comprise the 1992-2003 period. 96 Schiller and Brimble (2009, p. 60). 97 The 2006 coup which lead to the military-backed cabinet led by Gen. Surayut Chulanont.


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suggests that exceptional political autonomy is required to overcome the resistance from faculty and administrations enjoying civil servant status in long- established universities.

It is too soon to evaluate the benefits of autonomy for the five older universities that became autonomous in 2008. But a study by Liefner and Schiller (2008) shows real gains in the case of KMUTT. These include improved administration capabilities in human resources, budgeting, and academic affairs; greater latitude for initiative by the university President; and greater targeting of resources toward all functions, including industry outreach. Indeed, it seems that the autonomous universities, such as KMUTT, Suranaree, Khon Kaen and Mahidol, have become more nimble, more tightly networked, and more technologically savvy than the older, more established universities like Chulalongkorn and Thammasaat. As older, civil service faculty retire, their positions are converted such that new faculty are only hired to replace them as members of an autonomous university with expectations in line with the tenure system in the west. But in the meantime, the development of links with industry has been slowed by gaps between older civil servants and newly hired faculty.

Nonetheless, clear, positive results of more autonomous and S&T specialized universitieshave yet to materialize. For example, Mahidol University was the first university to form a company, STANG Holdings, to invest in university spin-offs..Since 2004, only three technical service companies have been established by firm. Most of the companies are still operated by university staff. Problems hindering commercialization include the difficulty ofselling and commercializing MU products due to general risk aversion towards business start-ups, a lack of marketing ability within MU, and the modest size of the firm’s current venture capital fund.98

E. University-Industry Linkages

In the aggregate, the UIL component of the Thai national innovation system is relatively weak and fragmented. At the same time, other processes of innovation in Thailand are at least remaining constant or in some cases improving. Brimble and Doner (2007) argue that this overall weakness is fostered by low levels of collective action among firms and a generally low level of interest in R&D generally. Over time, the factors reviewed above --weak academic capacity, mismatched supply and demand between universities and MNCs, and a political system marked by fragmented bureaucracies -- has diminished the credibility of universities as a viable innovation partner for firms.99

Recognizing this overall weakness, the Thai government has initiated serious education and training reform, such as the Education Reform Act of 1999 noted above. Autonomous universities, it was thought, would be better able to create effective UILs with private firms. Additional reform aimed at improving UILs was the Higher Education Development Project (HEDP) with the financial support from Asian Development Bank. This reform created seven centers of excellence designed to foster collaboration between universities and the private sector.

98 Virasa (2008)99 See Doner and Brimble, 2007 and Schiller and Brimble, 2009 for more on these arguments.


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Yet despite some progress, most of these reforms have not met expectations or early signs of promise. They have, instead, been slow and incomplete.

There are, however, bright spots. A few universities that were started or have moved out of the government bureaucratic structure have begun to successfully position themselves as value-added partners with several growth industries, including information technology electronics, agriculture (primarily rubber and energy crops), automotive, pharma- and neutra-ceuticals, and medical products and devices.

In the rest of this section we first look at the evidence for weak UILs. The firm-level data look not only at general levels of collaboration, but at differences among firms and industries. The section then explores the reasons behind this general weakness and the causes of weak capacity and credibility. We then examine recent efforts at reform and its level of success. Finally, we look at the university outliers with an interest in understanding why they differ from the general pattern.

1. Thai Firms and University Research and Development

The consequence of the capacity gap between universities and firms, and the resultingcredibility gap, is that firms do not access universities as much as other sources for innovation. Even so, the level of firm access to universities is growing. Also, different kinds of firms and industries access universities for research and development differently.

To assess the level of UILs within Thailand, we rely on R&D and innovation surveys carried out by the National Science and Technology Development Agency (NSTDA) starting in1999. R&D surveys were carried out ever year, but the innovation surveys were done only in the years 1999, 2001, and 2003100.

The survey in 1999 was the first of its kind in Thailand and it covered both R&D and other technological innovation activities only in the manufacturing sector. Since 2002 service sectors are included in the survey to get a more comprehensive understanding of the nature and differences of R&D and innovation activities. The surveys adopted definitions and methodologies used by the OECD (see, Frascati Manual 1993) and Oslo (see Manual 1997) and other countries in Asia (namely Singapore, Malaysia, Japan, Taiwan and Korea) to meet international standards (see Table 5). The surveys give a broad understanding of the university-industry relationship in Thailand, but they do not provide answers to specific issues like mode of collaboration, factors supporting or constraining effective collaboration. Detailed information at this level requires a specific UIL surveys or in-depth interviews.

Table 5: Thailand’s Innovation Surveys: Characteristics and Overall Results

1999 2001 2003

100 The survey concluded in 2003. The fourth survey is now underway and the results will be known in late 2010. The annual R&D surveys are much shorter and do not ask for extensive information on collaboration and the innovation environment. These surveys, however, are not sufficient for our analysis.


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Size of population - manufacturing sector 13,450 14,870 16,432- service sector n.a. 26,162 5,221 Total 13,450 41,032 21,653Size of sample- manufacturing sector 2,166 3,945 4,850- service sector n.a. 2,137 1,181 Total 2,166 6,082 6,031Response rate (%)- manufacturing sector 47.0% 36.7% 42.3%- service sector n.a. 37.3% 45.0% Total 47.0% 36.9% 42.8%R&D performing firms (%)- manufacturing sector 12.7% 4.4% 7.2%101

- service sector n.a. 0.2% 2.4% Total 12.7% 1.7% 6.0%Innovating firms (%)- manufacturing sector 12.9% 4.7% 6.4%- service sector n.a. 1.4% 4.0% Total 12.9% 2.6% 5.8%

Source: Reports on R&D/Innovation Surveys Year 1999, 2001, 2003 by National Science and Technology Development Agency (NSTDA).102

Between 1999 and 2003, on the whole, the most important sources of information and knowledge for R&D-performing firms and innovating firms were clients and sources within the company while the universities or higher education institutes and public research institutes were not seen as the major source of information and knowledge for R&D and innovating firms (see Table 6).

Table 6: Sources of information and knowledge for 1999-2003 (0- not know, 1-not important, 5- very important) 101 The smaller percentage of innovating firms compared to R&D performing firms in 2003 might be unexpected. Nonetheless, this is possible, as not all R&D activities are for innovation. Firms can conduct R&D for problem-solving purpose or just for increasing absorptive capacities in understanding and monitoring new technologies (Cohen and Levinthal,, 1990) . Even R&D activities aimed at creating innovation, many might fail. 102

The surveys focused on determining the characteristics of firms that carry out R&D and other innovation activities. It also covered the types of R&D and other innovation activities as well as factors that influence firms’ abilities to carry out R&D and other innovation activities. The sampling methodology was developed in order to obtain unbiased estimates of the parameters to be measured – expenditure on R&D/Innovation and total R&D/Innovation personnel in manufacturing and service enterprises. The Business On-Line (BOL) database, with comprehensive information on around 50,000 establishments registered with the Commercial Registration Department, Ministry of Commerce, was used. In addition to the BOL database, other sources of information such as the Board of Investment, the Department of Export Promotion and the Computer Professional Information 2002 were also utilized for the service sector’s sampling frame. The population size, sample size, and response rate, percentage of R&D-performing firms and innovating firms are illustrated in Table 5.


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Source of Information1999 2001 2003R&D Firms

Inno Firms

R&Dfirms

Inno Firms

R&D Firms

Inno Firms

Sources within the enterprise

3.33 2.71 4.27 4.08 2.55 3.66

Parent/associate companies

2.51 2.11 3.38 3.22 1.75 2.68

Clients 3.40 2.91 4.08 3.73 2.48 3.76Locally-owned suppliers

2.58 2.18 3.39 3.05 2.00 2.97

Foreign-owned suppliers

2.69 2.15 3.10 3.05 1.92 2.75

Universities or higher education institutes

1.99 1.64 2.46 2.13 1.56 2.03

Government or private non-profit research institutes

1.92 1.63 2.14 1.95 1.51* 2.08* 1.05**

1.59**Business service providers

1.65 1.54 2.18 1.95 1.20 1.79

Technical service providers

1.97 1.80 2.59 2.39 1.44 2.24

Competitors 2.48 2.22 2.71 2.59 1.83 2.84Patent disclosures 1.44 1.39 2.17 2.07 1.26 1.75Fairs and exhibitions 2.40 2.11 3.12 3.10 2.00 2.85Professional conference & meeting

2.47 2.09 3.16 2.68 1.88 2.70

Specialist literature 2.73 2.23 3.25 2.73 1.92 2.69Internet 2.42 2.04 3.54 3.45 2.32 3.34Remark: *Public research institutes **Private non-profit

Source???: NISTDA Innovation Survey?

For firms likely to conduct R&D, universities were less likely to be used as sources for collaboration (see Figure 1). Firms in this category that regard universities or higher education institutes as relatively more important as a source of collaboration were:

founded between 6 and 15 years ago 71-100% locally owned have 200 employees or less in the medical and precision and optical instruments industry for the manufacturing

sector in the telecommunication industry for service sector


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For Firms likely to innovate, universities were less likely to be used as sources for collaboration (see Figure 2). Firms in this category that regard the university or higher education institute as relatively more important sources of collaboration were:

founded more than 15 years ago more than 71% locally owned have more than 400 employees in textiles industry for manufacturing sector in telecommunication industry for service sector

Figure 1: External Collaboration for R&D Activities for 1999-2003 (0-not know, 1-not at all, 5-very intensely)

Remark: In the years 1999 and 2001, research institutes and universities are in the same category while public research institutes are separated from universities in the year 2003.Source? NISTDA Innovation Survey?

Figure 2: External Collaboration for Product Innovation for Year 1999- 2003 (0-not

know, 1-not at all, 5-very intensely)

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Customers buyers

Locally-owned suppliers



Public research institute

Private non-profit

Universities

Business service providers


Competitors

Other government agencies

Other firms

Cooperation (1-not at all, 5- very intensely)

1999 2001

2003


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0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Customers buyers





Private non-profit

Universities



Competitors


Other firms


1999 2001

2003

Figure 3: External Collaboration for Process Innovation for Year 1999- 2003 (0-not

know, 1-not at all, 5-very intensely)

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Customers buyers





Private non-profit

Universities



Competitors


Other firms


1999 2001 2003

Figures 1-3 show that overall, firms involved in innovation and R&D, whether product or process were more likely to rely on:

customers/buyers locally-owned suppliers


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foreign-owned suppliers and parent/associate companies

Over the period of 1999 to 2003, the R&D environment in which firms operated improved.However, firms reported that the availability of manpower in scientific and technical sectorsworsened during the period (see Table 7). The contradiction might be because these two related issues are overseen by different policies and different agencies. While R&D environment is under the R&D policy of the Ministry of Science and Technology and its R&D operating agencies, the S&T manpower policies are largely under the education policyof the Ministry of Education.

Table 7: Environment in Thailand for R&D Activities (0-not know, 1-very weak, 5-

very good)

Year Availability of government incentives

Availability of manpower in scientific-technical sector

Availability of manpower in business sector

Technological sophistication of local suppliers

Consultancy support services

Local university for technical support

1999 1.77 2.27 2.29 2.23 2.05 2.182001 2.77 3.10 3.17 2.94 2.65 2.722003 1.60 1.78 1.91 1.83 1.61 1.73

Year R&D institutions for technical support

Availability of other technical supporting services

Acceptance of failure

Attitude of people towards innovation

Openness of customers to innovation

Openness of suppliers to innovation

1999 2.15 2.03 2.00 2.34 3.03 2.712001 2.66 2.79 2.40 3.12 3.39 3.192003 1.76 1.53 1.40 1.90 2.27 2.13

Year Openness of government department & regulatory authorities

Regulatory environment

Intellectual property protection

Quality of telecommunications and IT services

Availability of finance for innovation

Listing requirements on SET stock exchange

1999 2.15 1.82 2.16 2.31 2.03 1.452001 2.87 2.53 2.64 3.40 2.40 1.67


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2003 1.69 1.55 1.72 1.86 1.72 1.01

From year 1999 to year 2003, openness of customers to innovation and openness of suppliers to innovation were seen as strong factor for supporting R&D and innovation activities while technical supports from universities and research institutes government and university were moderate (Table 8).

Table 8: Environment in Thailand for Innovation Activities (0-not know, 1-very weak,

5-very good)

Year Availability of government incentives

Availability of manpower in scientific-technical sector

Availability of manpower in business sector

Technological sophistication of local suppliers

Consultancy support services

Local university for technical support

1999 1.83 2.41 2.42 2.40 2.15 2.102001 2.46 3.19 3.28 3.02 2.68 2.402003 2.17 2.51 2.66 2.60 2.37 2.36

Year R&D institutions for technical support

Availability of other technical supporting services

Acceptance of failure

Attitude of people towards innovation

Openness of customers to innovation

Openness of suppliers to innovation

1999 2.03 2.10 1.96 2.62 3.17 2.862001 2.30 2.53 2.34 3.18 3.49 3.222003 2.30 2.21 1.94 2.82 3.43 3.08

Year Openness of government department & regulatory authorities

Regulatory environment

Intellectual property protection

Quality of telecommunications and IT services

Availability of finance for innovation

Listing requirements on SET stock exchange

1999 2.27 1.97 2.22 2.38 2.11 1.522001 2.73 2.73 2.72 3.38 2.68 1.482003 2.39 2.18 2.46 2.74 2.47 1.40

Likelihood for UILs, while weak generally, was stronger in some sectors than others. In the manufacturing sector, universities or higher education institutes were more important as


39

sources of information for innovating firms in traditional sectors like food processing or textiles while public research institutes were more important for innovating firms in printing and synthetic rubber and plastic industries. For the service sector, innovating firms in telecommunication considered both universities and public research institutes as important sources of information and knowledge. Not surprisingly, firms providing R&D services consider university and public research institutes as significant sources of knowledge and information (see Table 9). Most spillovers varied widely, and were mostly limited to specificsectors (i.e., spillovers to the economy at large were minimal). This fact will be elaborated more below in the report’s sectoral analysis.

Table 9: Importance of source of information and knowledge by industrial sector for

innovating firms in 2003. (1-not important, 5- very important)

Sector Universities or other higher education institutes


Food 2.75 2.43Textiles 3.25 2.50Wearing 2.00 2.00Dyeing 1.00 0.75Wood 1.33 1.33Paper 1.75 2.00Printing 2.67 3.00Petroleum 1.95 1.90Chemicals 1.58 1.67Synthetic rubber/plastic

1.50 3.00

Non-metallic 1.17 1.33Basic metal 1.75 1.75Fabricated metal products

1.80 1.90

Machinery 2.00 2.00Electrical machinery 1.73 2.18Radio 1.25 2.13Scientific instrument 2.13 2.38Motor 2.08 2.23Other vehicles 1.00 0.75Furniture 1.20 1.50Telecommunication 5.00 3.00Financial 2.50 2.50Computer 2.33 2.67R&D 3.00 3.00Other services 2.29 2.43Total 2.03 2.08


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In the manufacturing sector, R&D-performing firms in the petroleum industry were more likely to collaborate with public research institutes more intensely than firms in other industries, while R&D-performing firms in fabricated metal products industry had interaction with universities more intensely than other industries. In the service sector, R&D-performing firms in telecommunication and computer industries collaborated with public research institutes and universities more intensely than firms other industries (see Table 10).

Table 10: External collaboration for R&D activities by industrial sector in 2003. (1-

notimportant, 5- very important)

Sector Universities or other higher education institutes

Public research institutes

Food 1.94 1.68Textiles 1.33 1.67Dyeing 1.00 0.33Wood 1.50 1.50Printing 2.00 2.67Petroleum 3.00 3.33Chemicals 1.25 1.20Synthetic rubber/plastic 2.22 1.78Non-metallic 0.00 1.00Basic metal 1.67 0.33Fabricated metal product3.67 2.33Machinery 1.44 1.78Electrical machinery 1.83 2.17Radio 2.14 2.29Scientific instrument 0.33 0.33Motor 2.86 2.00Other vehicles 1.00 1.00Electrical machinery 1.20 1.60Telecommunication 5.00 4.00Financial 0.00 0.00Computer 4.00 4.00R&D 3.50 3.50Other services 2.00 1.50Total 1.82 1.69

In the manufacturing sector, product-innovating firms in electrical machinery industry had more intense collaboration with public research institutes and universities than firms in other industries. For the service sector, product-innovating firms in the telecommunication industry had more intense collaboration with public research institutes and universities. (see Table 11).


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Table 11: External collaboration for product innovation activities by (0-not know, 1-not

at all, 5-very)

intensely)Sector Universities or other higher

education institutesPublic research institute

Food 1.10 1.20Textiles 0.50 1.50Wearing 2.00 3.00Dyeing 0.75 0.25Wood 0.33 0.33Printing 1.50 1.75Petroleum 1.67 2.00Chemicals 1.10 1.05Synthetic rubber/plastic 1.58 1.42Non-metallic 0.00 1.50Basic metal 0.00 0.00Fabricated metal product1.00 1.00Machinery 1.20 1.50Electrical machinery 4.00 5.00Radio 0.64 0.64Non-metallic 1.00 1.88Scientific instrument 0.50 0.63Motor 0.77 0.69Other vehicles 1.00 2.25Furniture 0.30 0.60Telecommunication 5.00 4.00Financial 0.00 0.00Computer 1.67 1.67R&D 2.33 2.67Other services 1.86 2.57Total 1.03 1.21

Finally, for process innovation, firms in electrical machinery industry had more intense collaboration with public research institutes than firms in other industries, 103 whereas innovating firms in petroleum industry had more intense collaboration with universities than those in other industries (see Table 12).

Table 12: External collaboration for process innovation activities by(0-not know, 1-not

at all, 5-very)

103 Since it is very difficult to differentiate between product and process innovations in the service sector, the Thai surveys did not have a separate category for process innovation in services.


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intensely)Sector Universities or other higher

education institutesPublic research institute

Food 1.22 1.13Textiles 0.75 0.50Wearing 2.00 3.00Dyeing 0.75 0.50Wood 1.33 1.33Printing 1.75 2.00Petroleum 2.33 2.67Chemicals 0.67 0.48Rubber 1.42 1.08Non-metallic 0.00 1.50Basic metal 1.00 0.50Fabricated metal product2.00 1.50Machinery 0.90 0.90Electrical machinery 2.00 4.00Printing 1.00 0.91Radio 0.75 0.75Scientific instrument 0.75 0.63Motor 1.69 1.69Other vehicles 0.75 2.00Furniture 0.70 1.20Total 1.10 1.08

The data in these tables suggest that UILs in Thailand are weak in general. Thai firms find innovation partners most often in their customers, local suppliers, foreign suppliers, and parent/affiliated companies before they turn to universities. Nevertheless, some firms are more likely to use universities and public research institutes as collaborators in research and development. Which firms are more likely to access information or to collaborate depends on whether the need is for general R&D, product innovation, or process innovation.

2. Explaining Thai University Capacity and Credibility

What explains this persistent low level of collaborative interaction between universities and firms in Thailand? Perhaps the largest hurdle keeping Thai Universities from being valuable innovation partners is the generally low level of scientific and technological research capacity and sophistication. Without a strong base of research capacity, there are few universities, indeed even faculties within universities, where firms can successfully connect to further their research and development. Over time, this lack of capacity has led to a credibility gap (Schiller and Brimble 2009).

Improving capacity, however, is not the only answer to the credibility gap. The other problem well noted by many scholars (including Doner 2009, Ritchie 2010, and Schiller and Brimble 2009), is that a fragmented and often dysfunctional bureaucracy has created incentives and interests that militate against productive change. Thus, even when reform is


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well conceived and badly needed, it rarely leads to long term improvements. The answers to why reforms often fail can be found in the politics, which we explore in a following section.

Operating within the formal civil service, most universities have been unable to extricate themselves from the preferences, incentives and rewards of government bureaucracy. The highly fragmented Thai bureaucracy makes the education and training infrastructure extremely atomized and disconnected.104 Fragmentation hinders firm collaboration with academic institutions that are connected to multiple ministries, departments, and agencies. Examples of how duplication and fragmentation can hinder UILs can be seen in both the Sugar and Rubber industries.105

Due to a rapid rise in the value of the entire sugar plant (both the cane and bagass) for products beyond sugar, such as fuels and chemicals, sugar companies in Thailand are starting to reach out to universities to better understand chemistries, engineering, policy, sustainability, and supply chains of these new markets. But as one executive at the largest Thai Sugar Company explained, they could find no universities in Thailand interested in cooperating in cellulosic ethanol production. As a result, the Thai company partnered with Marubeni, a Japanese company, which then created several UIL connections to Japanese universities to help create a process that was successfully deployed in Suraburi Thailand.106

In addition to making it difficult for firms to connect with the university, operating within the bureaucracy creates incentives for university faculty and administrators that do not promote research and innovation. For example, since promotion and tenure does not require grants and funding outside the university, relationships between faculty and private firms are most frequently of a consultative type, with the monetary rewards not being invested in research, but accruing directly to the faculty as salary.

Finally, the factionalized nature of Thai politics with its subservience to vested and special interests has shown little concern for global competitiveness beyond price (Brimble and Doner, 2007). Since the development strategy of the state has concentrated far more on low-wage labor and foreign investment than on endogenous upgrading, there has been little demand for increased UIL capacity or the political will to make it happen.

3. Recent Reform

The general low level of university capacity and credibility has been evident since the early 1980s. Education reform has been focused on achieving better UILs through university autonomy and the Higher Education Development Project (HEDP) initiated in 1999. As noted, autonomy reform has been slow and inconsistent, with only a handful of universities meeting the deadline for transition to autonomous status.

The HEDP project has also experienced mixed success. Jointly funded by the Asian Development Bank and the Thai government, the HEDP allocated funds to seven centers in

104 Ritchie 2010, Doner and Brimble 2007.105 We discuss the rubber case in a separate section below.106 Ritchie Interview, August, 2009.


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various fields of study, each involving several departments and faculties at different universities.107 The aim was to encourage excellence in post-graduate education, international-level research, and linkages with business and other parts of society. UILs, were thus a major component of the HEDP.

At this point, the overall results of the project seem modest. Whereas universities with a focus on basic sciences have found it more difficult to offer services at the level required by industry, universities with agricultural expertise seem better positioned to link up with the private sector. Several "best practice" relationships have emerged from the HEDP in this area that can be diffused and expanded. The project has also, to a limited extent, facilitated a process in which linkages with the private sector has enhanced the core academic competencies of participating universities.

But disturbing weaknesses also persist. In 2006, a consultant to the project reported that the Commission on Higher Education did not establish a performance monitoring system during the first five years of the project despite the fact that such a system was required by the ADB loan.108 A 2009 review concluded that "UILs in Thailand are still weak and fragmented"for a number of reasons.109 First, although funding facilitated a clear increase in the number of graduates and post-graduate students and a growth in both quantity and quality of research equipment, there is still little evidence that the these expenditures have helped local industry. Second, although each center increased its own income generation capacities, very little of this came from work with industry (with the partial exception of the environmental science, technology and management center). And third, formalization of links with the private sector through Industry Advisory Boards and Industry Outreach Coordinators were viewed by center participants as potentially beneficial, especially for de-personalizing UILs, but not necessarily useful "since any kind of formalization of UILs is perceived as being inappropriate in the Thai context."110 The key point here is the assumption by Thai faculty and administrators that formal UIL structures must follow the establishment of informal collaboration.

Can Thai universities overcome these weaknesses? Despite the general low levels of UILs in Thailand, there are a handful of universities that have been able to create UILs that have made progress both in capacity and credibility. Each was either started or successfully moved out from under the civil service to autonomous status. Several of the most successful examples include King Mongut Institute of Technology, Thonburi (KMUTT), Saranaree University in Khon Kaen (SUKK), Mahidol University (MU), and for rubber the Prince of Songkhlaa University (PSU).

107 The seven areas include agricultural biotechnology; environmental hazardous waste management; environmental science, technology and management; energy and environment; chemistry; post harvest technology; and petroleum and petroleum technology. For participating institutions, see Schiller and Brimble (2009, p. 70). 108 Cited in Doner (2009, p. 51). 109 Schiller and Brimble (2009, p. 91), from which the rest of this assessment is drawn (along with personal communication with HEDP consultants)..110 Ibid., (p. 78; 89).


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The success of autonomous universities in forging connections with private firms is a promising indicator of important but isolated improvements. Prince of Songkla university has created a new masters and Ph.D. level programs in chemical engineering focused on biobased chemicals and fuels that include expertise in biomass agronomy, chemical engineering for biomass processing, saccharification, and fermentation. An emphasis on biochemicals and polymers makes the programs also very useful to firms operating in the rubber industry. In addition to advanced education programs, the university is also working to move new discoveries to market through de-risking and scale up activities at new pilot plant facilities. Technologies that stand a good chance of commercialization include new glues, building materials, pillows, and rubber cream. A new wave of indigenous patents and intellectual property are coming from these new discoveries and the processes of commercialization.111

KMUTT, perhaps the university pursuing UILs longer than any other, has created an infrastructure of finance, student learning, pilot facilities, and legal (intellectual property) systems most conducive to effective UILs. A former Permanent Secretary of the Ministry of Education remarked that only KMUTT and perhaps MU have substantial enough research programs to contribute to industry.112

IV. Sectoral Analyses

In the preceding pages, we have painted a fairly bleak picture of Thailand's NIS In this section we review three sectors exhibiting different types and levels of entry barriers: high-tech/scale-intensive (electronics), mid-tech/scale-intensive (automotive), and resource-based (rubber). In addition to fleshing out this the overall picture, our goals are to identify variation within the innovation system, and in so doing to draw out variables that constitute potential bases for strengthening the system.

A. Electronics / Hard Disk Drives

Electronics is the largest exporting industry in Thailand. In the year 2008, Thailand’s export of electronic and electrical goods was around $47 billion. Yet innovation in this sector is relatively weak. The latest (2003) NSTDA innovation survey covers the industry's two core sub-sectors: electrical machinery, and radio and television. 113 Overall, the survey paints a mixed, but largely discouraging picture, especially with regard to local capacities and linkages. The situation is more encouraging in a particular product area: hard disk drives.

Strengths and Weaknesses: The overall level of innovation is low: Only 5.9 percent of firms in the electrical machinery sub-sector and 1.9 percent of firms in the radio and television sub-sector had either product or process innovations.114 Among innovating firms, process innovation is more significant than product innovation, and the number of innovative

111 Ritchie interview, PSU, 8/2009.112 Ritchie, Interview Bangkok 7/31/09113 NSTDA (2003). 114 Unless noted, the next three paragraphs draw on Ibid.


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Thai-owned firms is more or less equal to the number of innovative joint ventures. On innovation-related expenditures, firms in the electrical machinery sub-sector spent much more on acquisition of machinery and external knowledge (48%) than internal R&D (22%). The pattern is the same for firms in the radio and television sub-sector (43% vs. 28%). This reflects the more general tendency of latecomer firms to acquire most innovation-related knowledge from external sources. Those resources firms did use on internal R&D were focused on increasing capacity to absorb the external knowledge they purchased. In the aggregate, surveyed firms responded that they conducted product innovation less than process innovation. R&D conducted on products consisted mainly on improving product quality and extending product range in the electrical machinery sub-sector and on improving product quality and opening up new markets in the radio and television sub-sector.

Innovating firms in this industry perceived collaborative research and technical support from universities as a moderate source for knowledge creation. Yet collaboration with educational institutions was considered as significantly less important than that involving clients, parent companies, suppliers and competitors, especially in the activities leading to both product and process innovation. For example, less than 30% of firms innovating in this sector used university laboratory services.

Hard disk drive production: This subsector merits particular notice owing to its significance for Thailand and its more robust record of efforts to promote local capacities through involvement with local institutions. The volume and scope of disk drive production have grown significantly since 1983, when the Board of Investment provided investment promotion privileges to Seagate Technology. Thailand’s rise in importance in the global production chains of the HDD industry followed earlier establishment of drive operations in Singapore by U.S. firms. Initially the industry began with firms making components, for example, head gimble assemblies, that were shipped back to Malaysia or Singapore for inclusion in the assembly of the final product. Over time, companies migrated additional manufacturing and assembly operations to Thailand. 115

By 2006, hard disk drive firms accounted for the largest percentage (32%) of Thai electronics export and almost 10% of Thailand’s total exports (NECTEC 2006). Thailand is presently the most important global base for hard disk drive manufacturing. Thai-based producers account for 48 percent of total global market share in the year 2006. The industry employed approximately 110,000 workers. At present four TNCs dominate Thailand’s production, namely Seagate Technology, Western Digital, Hitachi Global Storage Technology, andFujitsu. Over 60 supplier companies operate in Thailand: 34 1st-tier suppliers, 17 2nd-tier suppliers, and 3rd-tier suppliers making up the rest. Together, these firms constitute an impressive cluster and, according to an in-depth study by AIT/Asia Policy Research (2003), invest heavily and are strong exhibit strengths in investment, process development and industrial engineering. The dynamism of this foreign-dominated sector was most recently illustrated by the decision of Hutchinson Technology, a leading U.S. component producer, to set up its first overseas operation in Thailand.116

115 Refer to the innovation survey (2003). For an analysis of the first 15 or so years of the industry’s development, see McKendrick, et al. (2000).116 “Hutchinson Chooses Thailand as Base,” Bangkok Post, Feb. 9, 2010.


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Despite this growth, the industry has exhibited significant weaknesses. The AIT/Asia Policy Research study found that the firms showed much weaker capabilities in product engineering and innovation (than in process engineering), although U.S. firms seem to have gone further in building these capabilities in their Thai operations than their non-U.S. counterparts. The industry’s domestic value added remains low at 31%, although value-added in hard disk drives is relatively high compared to the average of the whole Thai electronics sector (NECTEC, 2006).

Reflecting the industry’s weak local linkages, as illustrated by the same innovation survey in 2003, only two of the 60 supplier firms are wholly owned Thai firms, the rest being foreign-owned companies or joint ventures. In addition, Thailand has been hard pressed to meet the industry’s demand for higher skills and improved R&D-related infrastructure. Thus, a 2008 report concluded that Thailand’s indigenous HDD suppliers were “negligible” and that there was an “urgent requirement for Thailand to upgrade technical skills.”117 Interviews with drive producers do suggest the presence of significant numbers of experienced, Thai process engineers who are critical to TNC local operations. But unlike in Singapore, there is little indication of any local spinoffs, i.e. of these engineers establishing their own firms to supply former employers.118

Another indicator of indigenous weakness involves patent activity granted to the HDD industry. Up until 2007, the data from Thailand’s Department of Intellectual Property (DIP)119 showed that DIP had granted 224 patents. From a starting point of zero in 1994, the number of patents increased rapidly from 93 patents during 1995-2000 to 123 patents during 2001-2007. Out of these 224 patents, only three were granted to Thai nationals and these were not from Thai companies but rather universities. This indicates that Thai firms, all 2nd tier suppliers or lower, lack technological and innovative capabilities to produce patentableproducts or processes.

The question is whether the industry can match its “extensive” growth with “intensive” development of indigenous inputs, both in terms of products and technical personnel. Beginning over a decade ago, drive producers expressed interest in promoting such development. Seagate was the “first mover” in this regard:120 Beginning in the late 1990s, the firm organized a loose consortium of five universities, including Suranaree University, to furnish customized courses and to train engineers capable of managing the firm’s highly automated production facilities. Seagate also established joint R&D centers, first with Khon Kaen and subsequently with Suranaree University. Both institutions are located in the Northeast, close to some of Seagate’s major production facilities.

These kinds of efforts have gradually been expanded throughout the sector but not initially due to government efforts. Indeed, as of 2005, Seagate officials reported no visits by officials interested in learning about and building on its initiatives. And one NECTEC

117 Pataraporn and Kwan (2008). 118 On Singapore's experience with locally owned precision engineering firms, see McKendrick et al. (2000). 119 Author’s own research120 See Brimble and Doner (2005, 1029-1030).


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official notes that "From 1983, when Seagate established the first assembly plant, until 2004....there was no formal support from the government to encourage long-term research collaboration between researchers in universities and HDD companies."121

Instead, sector-wide efforts to boost the country’s HDD-related technological capabilities,especially its human resources, originated from the Singapore branch of the International Disk Drive Equipment and Materials Association (IDEMA).122 IDEMA’s initial (1999) efforts, including several drive producers and the Asian Institute of Technology (AIT), aimed at developing a Certificate of Competence in Storage Technology offered at AIT with IDEMA support, similar to the certificate offered by IDEMA in Singapore. This effort met with only modest success, but it generated momentum and interest from NSTDA which, in 2003, financed an HDD industry cluster study to promote industry consensus on beneficial projects. This was followed by the creation of a cluster management organization, led by the CEOs of the four drive producers, local research institutes and representatives of key governmental organizations, such as the Board of Investment (BOI).

The organization, officially renamed in 2005 as the "Hard Disk Drive Institute" (HDDI), was headed by a technopreneur-cum-university professor who used to work for the industry. HDDI is pushing forward future projects aimed at upgrading capabilities of the whole industry in Thailand, including improving engineering training, identifying common operational problems, and developing visual inspection software. Several of these programs build on prior Seagate initiatives, and most are designed to promote and to make use of academic-industry consortia. Specific initiatives include:

* HDDI efforts encouraged the transformation of relationships between multinational producers and Thai universities from short-term, technologically unsophisticated and personal-based relations to longer-term, technologically advanced and institutional ones. For Western Digital collaborated with Suranaree Univesity to devise a new curriculum for a special engineering bachelor-degree program focusing on HDD technologies. Western Digital will employ graduates from the program. Moreover, 3rd year students who enrolled in the program receive a stipend equal to 75% of the salary of a bachelor-degree graduate. Seagate is also partnering with local universities, including KMUTT, Suranaree, and Khon Kaen Universities to do joint research and facilitate graduate education.123

* Through HDDI, several Thai engineers and researchers, not only those employed by TNCs, have been sent for training at the headquarters of TNCs like Western Digital in the US, up to a year and a half. Upon their return, these individuals conducted training courses for other Thai technical personnel and helped set up R&D laboratories within the foreign producers. This constitutes a first step in transforming Thailand from a production base to an

121 Chayakrit (2009, 200; emphasis added). 122 IDEMA’s initiative was an offshoot of the research sponsored by the Alfred P. Sloan Foundation through the Information Industry Storage Center at the University of California, San Diego and eventually published in McKendrick et al (2000). This review of the IDEMA initiative and subsequent developments draws on Intarakumnerd (2006c); Brimble and Doner (2005, 1030); and author interviews (2009).123 Author interviews, 2000, 2005, 2009.


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R&D base for TNCs, even though initially their R&D was aimed at upgrading the production process rather than developing any new product.

* HDDI organized three Industry-University Cooperative Research Centers in 2006, each specializing in a particular area: advanced manufacturing and automation, HDD components, and data storage technology and applications.124 In addition to promoting research networks, HDDI, through the centers, provides research funding for industrially relevant technologies. Before submission, all research proposals must be certified by private companies.

* HDDI is also trying to assist Thai producers (mostly SMEs) to qualify as suppliers for the multinational producers by providing training courses in critical skills such as automation processes for Thai firms who previously attempted but failed to qualify. HDDI is thus attempting to facilitate spillovers from foreign producers by strengthening the absorptive capacities of Thai firms and non-firm industry participants.

Summary: Even if the actual benefits of these efforts are not yet evident, linkages between disk drive firms and institutions of higher education in Thailand have clearly strengthened.125 Several aspects of this process merit note, especially if its lessons can inform other, sector-specific efforts at improving the higher education component of Thailand's NIS

Private Sector: Linkages between firms and universities stemmed from private sector initiatives. Perhaps surprising in such a high-tech industry, we suspect that these initiatives reflect two sets of forces. First, although technological entry barriers are high in disk drives, private sector interest in promoting local technological capacities reflects the industry's need for ongoing technological development, especially in production processes, and the fact that such development must occur in close proximity to regionally clustered production operations. Second, collective action among the drive firms seems to have been facilitated by their small numbers.

Government: Complacency, reflecting the industry's expansion, was the dominant feature of government strategy, at least as exhibited by the line organizations for the first decade and a half of the industry's development.126 More recently, however, NSTDA's involvement, especially its help in the creation of a cluster management organization (HDDI), has been critical for expanding and scaling up private sector initiatives.

Universities: University reform seems to have had a positive impact on the industry's capacicity for discovery, commercialization and skills formation. The educational institutions most actively involved in the process have been the newer universities, especially those in the Northeast, as well as the Asian Institute of Technology, not Thailand's traditionally strong universities (Thammasat and Chulalongkorn). Much of this differential

124 NECTEC (2006); Chayakrit (2009).125 A useful set of performance indicators is found in Chayakrit (2009). 126 Relevant ministry officials exhibited strikingly low levels of knowledge about the industry's needs at the initial (July 1999) meeting organized by IDEMA on the training needs of disk drive producers. BOI officials exhibited significant interest but bemoaned the Board's lack of industry-specific knowledge.


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involvement can be explained by the difficulty of changing institutional structures. Those universities most able to cooperate and collaborate with the private sector were those that were created outside the traditional government structure.

Sectoral Innovation System: The strengths of the disk drive industry's "sectoral innovation system" confirm the importance of private sector collective engagement encouraged by the public sector. Yet this system seems to operate through non-traditional and newly-formed agencies and universities, not through linkages to Thailand's more traditional line government agencies and associations, especially the Ministry of Industry, the BOI, and the electronics producers within the Federation of Thai Industries.127

B. Automotive Industry

Thailand's automotive industry has been hugely successful in attracting foreign producers in expanding production, exports, and employment, and in encouraging some R&D by multinationals. It has been much less successful in promoting local technological capacities, both in local suppliers and Thai educational institutions.

1. Strengths and Weaknesses: The automotive industry in Thailand began in early 1960s with the construction of plants to assemble knocked-down kits. Beginning in the 1970s, in response to high demand from assemblers and to government-imposed local contents requirements, Thailand developed Southeast Asia's largest local supplier base.128 Vehicle production rose from around 100,000 units per year in the mid-1980s to over one million in 2005, despite a slump following the 1997 crisis. Exports of both vehicles (especially one-ton pickup trucks) and parts rose as well. By 2007, Thailand produced around 1,300,000 vehicles of which 690,000 were exported, generating $13.5 billion.129 These exports are based on well-developed automotive clusters of both global assemblers and their largely transplanted parts and components suppliers for whom Thailand has become a key regional, if not global, production base.130 Although western firms have established Thai operations, the industry remains dominated by Japanese producers.

Multinational operations have benefited from the availability of local technical personnel. For example, executives from Toyota, the market leader in Thailand, declared that the production capabilities of its Thai subsidiaries are quite strong compared to other countries in the region. This strength is due to a relatively high number of qualified engineers and

127 It does merit note that in 2004, IDEMA worked with the BOI to make the HDD industry a "prioritised" sector enjoying particular privileges in return for R&D investments, employment of technical personnel, invest resources in promoting local component suppliers, and establish R&D centers (Intarakumnerd 2006b).128 By 1995, There were roughly 1,000 firms in the Thai auto industry compared to 287 in Malaysia, 279 in Indonesia, and 184 in the Philippines. Doner (2009, Ch. 7) from which the rest of this review is drawn, unless otherwise noted.129 TAI (2008). 130 The industry is currently comprised of 15 assemblers, approximately 500 1st-tier suppliers, and around 1100 2nd and 3rd-tiers suppliers (NESDB, 2004)


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technicians and the extensive supplier network, both of which enable integrated productioncapacity.131

Foreign auto assemblers have also exhibited greater interest in Thai-based R&D over the past five or so years. Toyota set up the ‘Toyota Technical Centre Asia Pacific Thailand’ with an initial investment of almost US$100 million. This is one of five R&D centers in Toyota’s world-wide R&D network. The emphasis of the centre is on materials development, location-specific design and engineering, parts improvement (e.g. strength and durability), and vehicle testing.132 The center employs 563 people (65 Japanese, 498 Thais), with a plan to expand the number of employees to 700 by 2012. 360 employees are engineers with a B.A.. Less than 10% are employees with a masters degree and only two employees have Ph.Ds. Most (63%) are mechanical engineers, a figure that reflects a focus more on, design, and creativity than process improvements. Nevertheless, as we point out below, there have been challenges associated with this focus.

Most of these challenges have to do with work force capacity. Executives at the centre report that they do not have problems recruiting qualified engineers; nor are there any complaints with basic engineering knowledge. Employees are judged to have more or less equivalent engineering skills to engineers in Japan. Instead managers complain of low language skills (English and Japanese), a lack of creativity (employees only doing what they are told by their supervisors) and a lack of teamwork skills. Thus, newly hired engineers must undergo in-house training, after which they are often sent to Japan for roughly a year of training. In Japan, the focus is more on product design than process.

Thai component suppliers also exhibit some strengths. The College of Management at Mahidol University (2006) conducted an extensive study based on an adaptation of the technological capability framework developed by Bell and Pavitt (1995). The study examined technological capabilities of six groups of automotive component suppliersproducing suspensions and brakes, interiors, exteriors, engines, electronics, and drive transmissions. The results showed that, in general, component suppliers in Thailand occupy one of two categories based on level of technological capabilities. Those in suspensions,brakes, interior and exterior had relatively higher capabilities and potential to competeregionally and internationally. The group producing electronics and transmissions exhibited lower capabilities, presumably due to the more sophisticated technologies of their products and the dominance of proprietary knowledge controlled by foreign assemblers.

Differences emerged between foreign- and Thai-owned parts producers. The former had higher capabilities in project management, quality control, and linkages with materials and technology suppliers. These capabilities reflect a greater ability of foreign part makers to coordinate their investment strategies with those of the parent firm and to conduct most of their product development activities in parent companies or headquarters. Thai-owned

131 Omura et.al, 2008.132 For example, wheel alignment measurement, side doors durability testing, CAD (for parts and body), irradiation chamber (for testing humidity and temperature resistance of finished whole vehicle) and scanning electron microscopic (SEM) analysis (for raw material’s toxic chemical analysis to meet international standards)


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firms, on the other hand, had higher capabilities in making investment decisions in product development and in establishing linkages with customers, markets, and supporting institutions. In addition, Thai-owned firms reported significant R&D almost twice as often as their foreign or joint venture counterparts. This presumably reflects the Thai firms'inability to rely on parent companies for technical support and, as a result, their greater need to make their own investment decisions, carry out product development activities on their own, and draw on local institutional supports to compete with foreign competitors.

While pressures to compete have certainly driven much of the innovation within Thai-owned firms, there has also been some, albeit limited, inter-firm technology transfer from foreign firms to local firms. Techakanont and Terdudomtham (2004), for example, conclude that foreign assembling firms have encouraged the dissemination of technology that has enhanced the technical capacity and growth of Thailand’s supporting industries. But the actual impact of such transfers seems relatively minimal in light of the inability of many local firms to sustain their positions after 1997. In fact, the 2003 innovation survey points out that overall innovation activities within Thai firms was limited to 25%,

An analysis of innovation in the automotive sector confirms local weaknesses while also shedding light on some areas of potential. In the automotive sector, there were 288 patentsgranted between 1981 and 2007. The number increased from 4 patents during 1981-1990 to 60 patents during 1991-2000, and to 224 patents during 2001-2007133. Most patents belong to Japanese carmakers and their subsidiaries. Most of these applications were from firms registering patents with the Thai Department of Intellectual Property that had already been registered in Japan134 The rise in patent activity is the result of two factors: 1) the WTO-induced change in Thai patent law in 1999 allowed parent firms registered in WTO member countries to apply for patents in Thailand (previously, only subsidiaries registered in Thailand were allowed to do so); and 2) the growing emergence of IP management, at least within the Japanese carmakers in Thailand, which was a function of Thailand's growth as aglobal export hub following the 1997 crisis.

But little of this activity, at least in full patents, has involved or spilled over to locally owned firms. Lacking technological support from the carmakers and their subsidiaries, Thai nationals account for only 35 or just over 12% of the 288 total automotive patents granted. Perhaps not surprisingly, most of the patents are for non-functional accessories rather than the OEM parts contracted to local firms by MNCs. On the other hand, there is evidence of

133 Authors’ own enquiry on the data of Department of Intellectual Property134 For example, since 2003, Toyota Motor Corporation (Japan) has had 87 patent applications and has been granted 19 patents. These patents refer to methods of production, details of material, and product designs and inventions. Interestingly, Toyota Motor (Thailand), a subsidiary of Toyota Motor in Thailand, was granted only one petty patent on “assembly jigs” in 2007. Honda Motor Co., Ltd. (Japan) has had 44 patent applications and has been granted 33 patents including design and invention patents for their motorcycles and automobiles. From 1996, Nissan Motor Co, Ltd and Nissan Diesel Motor Co, Ltd., subsidiaries of Nissan Motor (Japan), have had 18 and 13 applications, respectively, for invention patents. Nonetheless, after 2003, Nissan Motor Co., Ltd. (Japan) has had 20 applications for design patents. Similarly, since 2000, Isuzu Motor Ltd. has been granted 5 automobile design patents from 23 design patent applications. Innovation reflected in patent activity has also grown among foreign part suppliers. For example, Nippon Denso received 5 invention patents during 1985-1998. After 1997, Toyo Denso Kabushiki Kasha applied for 14 invention patents to DIP. Source??


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patent-based innovation in the larger Thai suppliers. For instance, Thai Summit Group, the largest Thai automotive-parts supplier, had one invention patent on an “electrical harness for automobile” in 2005. Thai Rung Union Car Company received eight design patents from 20 patent applications submitted. Sammitr Motor received three granted design patents during 2004-2005, and three petty patents for its inventions during 2005-2007. Of the 211 granted petty patents for the automotive industry, 177 belonged to Thais. This relatively large number of petty patents - rights for innovations that involve design modifications rather than "novel" inventions - suggests real potential in the product modifications designed for the Thai market. The capacity for such modifications has become a source of competitive strength, especially for Aapico, a successful Thai component producer that specializes in assembly jigs.135

Some other areas of potential strength also merit note. One, the focus of an industry-wide effort (see below), is mold and die production, an area in which Thai firms have long experience due to previous local content requirements. A second is in body parts, a niche in which pure Thai firms are relatively numerous and in which Thailand has developed a cluster of bus body producers.136 Finally, in response to the fall in domestic demand for auto-parts following the 1997 crisis, local producers expanded exports, especially in Replacement Equipment Markets.137

The overall level of technological capacity in the Thai automotive sector is thus mixed but not encouraging, at least with regard to Thai parts producers. On the positive side, as noted above, the industry's growth has generated a significant pool of technical labor. In addition, Thai-owned parts firms have reacted to a lack of support from foreign carmakers by developing strengths in areas such as investment planning and product development. And finally, large local firms seem to have been especially active in equipment and, perhaps, product modification, as reflected in numbers of petty patents. But after over two decades of promotion and industry expansion, Thai parts producers failed to develop the base of indigenous knowledge required to operate with much autonomy, much less become active participants in global value chains. The 1997 crisis pushed many of these firms toward bankruptcy or takeover by foreign partners, a process facilitated by the lifting of a 49% limit on foreign ownership. Real local content was closer to 20% than the official 54-70%, and the number of Thai OEM suppliers has dwindled significantly in the face of the post-1997 shift to exports.

This shift has resulted from increasingly stringent production requirements and competition from an influx of foreign component producers.138 Further, the design capacities noted above remain minimal. In the words of a 2005 report: "One of major weaknesses of the Thai auto-parts industry is in technology, particularly in design capabilities, including product

135 Doner (2009, p. 273). 136 According to the Asia Policy Research study, "pure Thai" firms constituted almost 50% of the 119 tier 1 body part producers (2005, 5). On the bus body cluster, see Intarakumnerd (2006c, pp. 16-17).137 Most of these are presumably not "genuine" parts certified and distributed by original brand producers, but rather "original" parts (meeting "genuine" quality standards but distributed by the parts producers) and "imitation" (lower quality) parts. See Asia Policy Research (2005, p. 11).138 See Doner (2009, fn. 7, p. 232) for estimates of Thai-owned suppliers.


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design, model making and creating prototypes incorporating product specific technology."139 Finally, while Thai parts producers lack the technological capacities of Korea and Taiwan, they have difficulty competing with countries such as Indonesia, the Philippines and China in terms of production costs.140

These weaknesses will only become more damaging in light of two important shifts: First, carmakers have shifted from providing product designs, drawings and prototypes to domestic parts producers to expecting that the latter possess such capacities themselves. Second, the increasingly free trade allows foreign carmakers to expand global rather than local sourcing. These weaknesses thus constitute the dark underbelly of Thailand's dynamic, but largely foreign-led, automotive success. A 2005 Japanese report highlighted the "ambiguity" of Thailand's export-led automotive growth: "“If Thai firms grow healthily along with foreign firms, all is well. But if local firms are eliminated and the industrial base continues to be dominated by foreign firms due to the lack of competitiveness or ineffective policy, will Thailand still be satisfied?”141

2. Policies and Institutions: This mixed picture of impressive expansion but weakened and perhaps falling indigenous presence reflects particular set of policies and institutions "governing" the industry. Growth in production and expansion resulted from 1) astute macroeconomic policies, 2) well-designed tax and other promotional incentives geared to encourage scale economies in one-ton pickup trucks, 3) infrastructural policies designed to promote dynamic automotive clusters, and 4) tariff and tax exemptions designed to encourage exports. In contrast, weak local technological capacities reflect the initial lack of pressure on local firms to improve technology during the period of local content protection, and the consistent lack of government support for technological development, even after the shift to export promotion.

These policies are reflected in the general weak linkages between auto producers and Thai educational institutions. In general, R&D and human resource development have occurred largely within foreign firms, and this pattern has emerged despite a number of efforts to link industry and education.

* Chulalongkorn University established a bachelor-degree program in its automotiveengineering department in the early 1990s with support from Toyota.142 More recently, Thammasat' University established a curriculum in automotive and design engineering in 2005. Both of these programs have received some support from Japanese carmakers. Although promising, the impact of these programs seems limited by their relatively small scale, a lack of the "cooperative engagement" seen in the disk drive case, a lack of emphasis on process R&D (as opposed to product R&D), a lack of incentives for engineers to emphasize technology as opposed to administration, and constraints on curriculum development imposed by university requirements. Further, reflecting Thailand's general problem of mismatch between education and labor market demand, shortages of high-quality

139 Asia Policy Research (2005, p. 19). 140 Note that these comparisons are from a 2000 study cited in Ibid. (p. 17). 141 Ohno/VDF (2005, 3).142Unless noted, this paragraph draws on an interview with Dr. Khaokhiat Boonsakul (June 2009).


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technicians seems to be more pressing than a lack of engineers.143 Remedies for this problem are not likely in the short term. In addition to the general fragmentation in Thailand's vocational training system noted above, some technical institutes have attempted to transform themselves into Bachelor degree-granting institutions. In addition to reducing the supply capacity for well-trained technicians, this effort seems to have been premature and may be contributing to a weakening of the vocational system’s core training functions.

* KMUTT has created an automotive engineering degree with the help of GM and Ford, but it is in the early stages of implementation.144

* Indigenous firms struggling to survive as 2nd or 3rd tier suppliers in both OEM and replacement markets have struggled to create an independent testing facility as part of a broader university-based automotive engineering program.145 The goals of such a facility were for locally owned firms 1) to avoid spending large sums of money and time to have their products tested overseas by the assemblers, and 2) to use such a facility to identify and resolve common problems in process management. In the face of assembler indifference and inconsistent state support, including Budget Bureau officials who argued that assemblers could provide testing services, the effort has faltered.146

* In 1996, as part of its successful effort to lure GM to Thailand rather than to the Philippines, the Thai government committed itself to invest $15 million to create an automotive training institute, with the stipulation that other manufacturers be allowed to send their employees to the institute.147 Another incentive to GM was the government's agreement to lift the 54% local content requirement on passenger vehicles. In the event, the government lifted the local content requirement but dropped the training institute.

* In 2006, the Ministry of Industry and the Thai Automotive Institute (TAI) launched the Automotive Human Resources Development Project (AHRDP) in cooperation with Japanese producers. Essentially a "train the trainer" program, the effort is based on collaboration among four Japanese producers, each of which will specialize in a particular competency. For example, the program will provide training for local mold and die producers, firms occupying a mid-technology niche whose activities expanded under local contents requirements but whose position was severely weakened by the 1997 crisis and the increasingly stringent requirements resulting from the move to exports. It is unclear if these firms will benefit from the AHRDP in light of assembler moves to supply molds and dies from transplants or to produce them in-house. The program does not, moreover, stipulate linkages with local educational institutions.

3. Summary: Linkages between the automobile industry and institutions of higher education have historically been limited and, with minor exceptions, remains so. Responding to a range of factors, the roles of key actors can be summarized as follows:

143 Chulalongkorn's program graduates roughly 15 engineers annually out of a total of 680 in the University's engineering program. (Interview with Dr. Khaukhiat Boonsakhul, June ?, 2009.) On the general problem of mismatch, see World Bank (2010).144 Ritchie interview 2009.145 This and the following paragraph draw on Doner (2009, Ch. 7).146 Recent emphasis on the problems of inconsistent government support came from Dr. Khaokhiat Boonsakul (Interview, June 2009). 147 Bradsher (1996).


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Private Sector: Like electronics, carmakers - auto assemblers and their core suppliers - have chosen Thailand as a manufacturing base for its low wages, relatively skilled workforce, availability of local suppliers, and rather impressive infrastructure. But these firms' engagement with the Thai innovation system, especially the educational component, is weaker than arrangements seen in the disk drive case. This can be explained first, by the fact that the large number of foreign auto assemblers (10) and components suppliers makes collective action difficult in autos. Second, although technology entry barriers are lower in autos than in disk drives, the bulk of production and process innovations can take place in the automakers' home headquarters and, to the degree that Thai-based R&D and training is required, in-house. In contrast, Thailand and the rest of East Asia, is in effect, a big part of disk drive firms' "home headquarters." Third, Japanese firms, dominant in auto, may be less flexible and less open to university linkages than U.S. firms such as Seagate and Western Digital in disk drives. Fourth, the dominant Japanese car producers rely heavily on networks with existing, foreign, transplanted suppliers. Innovations and improvements happen through these producers-supplier interactions rather than university-industry linkages.

Fifth and finally, political economy considerations play an important role. Unlike disk drive producers (and auto assemblers), indigenous (Thai) firms lack not only the internal capacity and resources for technical training, process and product innovation. As largely small and medium-size firms, they also lack political leverage when it comes to sectoral policy, especially in a context where the industry as a whole has expanded.148 Without engagement from the large manufacturers, conditions are likely to change only at the margins.

Government: As in disk drives, astute government policies in taxes, tariffs, ownership requirements, and infrastructural provision (to encourage clusters) were highly successful in promoting industry expansion. More than in disk drives, however, this expansion has generated potential low-mid technology niches for local firms, such as in molds, dies, jigs, springs, and body parts. Further, several local firms, benefiting from lower technological entry barriers and more extensive government promotion than in disk drives, have responded to these opportunities with R&D and initiatives in equipment modification. But as in disk drives, automotive industry growth has encouraged a general attitude of official complacency with regard to local technological capacity. This complacency is at odds with the "sense of urgency" highlighted by the World Bank's recent report on higher education.149

The partial exception to this complacency has been the creation of the Thai Automotive Institute as a public-private mechanism for human resource development and technology transfer to local producers. The TAI has been led by individuals with strong commitments to technology promotion and extensive automotive experience. But the Institute has the burden of operating as a "quasi-autonomous" entity under the Ministry of Industry. The MoI wants the Institute to be financially independent but still beholden to the Ministry. The TAI also lacks the kind of backing from the private sector seen in the HDDI. Indeed, without strong support from foreign producers, most of whose core activities occur in-house, the TAI is forced to earn income from the provision of various training programs and has had little

148 This is especially the case for firms producing for the replacement market.149 World Bank (2010, p. 101).


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capacity to forge linkages between multinationals and Thai suppliers, as well as with local universities.

Universities: The relative absence of foreign carmakers in sector-wide technology promotion activities is also evident in their lack of engagement with Thai universities. This absence seems to reflect two factors: First, the firms' lack confidence in Thailand's education and training systems. Indeed, government credibility in areas of training is low, especially in light of its failure to fulfill its commitment to GM to create an automotive training institute. Second, the firms find it convenient to address training and technological challenges in-house.150

That universities do not unilaterally create new education and research facilities for the auto industry is not surprising, given the high startup costs and innovation barriers with respect both to faculty and research laboratories. Without private sector participation, universities are unlikely to have the intellectual or monetary resources to take the first step. Where progress is happening is in new, startup universities that are flexible and nimble and have few barriers to creating scaleable, highly interactive relationships with the major manufacturers.

Sectoral Innovation System: Disk drive firms, through a private sector-led-but-NSTDA-supported organization (HDDI), have effectively circumvented Thailand's traditional line ministries. In contrast, automotive firms have either had to deal with the more traditional Ministry of Industry or opted to go it alone. In these conditions, public-private collaboration on policy and institution building remains fragile, as does the sectoral innovation system in autos.

150 These perspectives were emphasized in an interview with an official from Denso (Thailand), June 9, 2009.


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C. Natural Rubber (NR)

In 2005, Thailand, Malaysia and Indonesia accounted for roughly 70% of global output andover 70% of global rubber exports.151 During the 1980s, Thailand overtook the traditional leader, Malaysia, to become the world's largest producer and exporter, accounting for roughly 40% of global exports (compared to 26% for Indonesia and 17% for Malaysia). NR is economically and politically significant for Thailand: Rubber has traditionally been one of the country's top three agricultural exports; some one million rural families (and around six million people) rely on the product; and rubber production is concentrated in the politically troubled South. The evolution of Thailand's NR sector, especially relative to that of Malaysia, reflects a set of policies and institutions well suited to expansion and yield improvement but much less appropriate for the promotion of upstream and, especially, downstream linkages.

1. Strengths and Weaknesses: One reason for Thailand's ascension to the number one position as global producer and exporter has been its success in expanding rubber planting areas; a process that has begun to occur in the North and Northeast as well as in the South.152 Equally important has been the country's impressive performance in yield increases. Since the mid 1980s, Thailand's yields have risen consistently through improvements in breeding, planting techniques, tapping, and overall crop husbandry. By 2004 Thai yields were double those of Malaysia and Indonesia.

Thailand's performance has been less impressive with regard to NR quality, as reflected in the distinction between visually graded rubber (sheet rubber) and technically specified types ("block" rubber).153 Although simple to produce, sheet rubber does not lend itself to clear grading or specification. And while block rubber requires a more complex process, it allowseasier processing for downstream users requiring high-quality, standardized product, improved presentation, and more unitized packing. Block rubber production was actually a (1965) Malaysian innovation, and Malaysia moved quickly to produce this product on a large scale. Large volumes of block rubber were produced in Thailand only in the mid-1970s; block rubber exports exceeded sheet rubber only in 2005; and according to a recent study, the quality still has to be improved.154

Thailand has also lagged Malaysia with regard to the development of a downstream, rubber-based industrial sector. To be sure, Thailand's exports of rubber-based goods have increased: The country is one of the world's largest producers of condoms, elastic bands, and certain types of rubber gloves, and a significant producer of products such as footwear.155 But most - almost 90% - of Thailand's NR is exported in largely unprocessed form; very little

151 The production of the three large Southeast Asian producers combined with that of Vietnam, China and India accounts for almost 90% of global production. Unless otherwise noted, data on production, exports and yield are drawn from UNCTAD (2008). 152 Average increases were 26,000 for the North. Areas replanted were, as expected given the South's history of cultivation, much larger than the other areas. (RRIT 2007, Tables 22 and 23).153 Information on rubber quality is drawn from RRIT (2007, 8-9); and UNCTAD (2008). 154 Somsak (2009, p. 5)155 RRIT (2007, Table 15); and Somsak (2009), from which the rest of this paragraph is drawn unless noted.


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is used in the production of rubber-based manufactured goods. According to one source, Thailand accounts for only 2% of world tire production, a very low level relative to its position as a n NR producer. 156 Further, there are a number of relatively low-technology rubber products (e.g. rubber bands, rubber pipes, conveyor belts, and "bias" tires) whose export potential has not been exploited in Thailand. In contrast, some 90% of Malaysia's rubber is used in domestically produced manufactured goods. Thailand is especially weak with regard to upstream inputs/supporting industries. There does seem to be some local provision of chemical inputs such as carbon black. But local production of even low-technology capital equipment is minimal, and most equipment is imported.157

The performance of Thailand’s rubber industry has been impressive in expanding cultivation and raising yields, moderate with regard to rubber quality, and weak with regard to rubber-based manufactured goods and upstream inputs, especially capital equipment. This record reflects an accumulation of knowledge and expertise specific to NR cultivation and yield, as well as rubber marketing, but significant weaknesses in technologies related to supporting industries and rubber industrial products. Specific problems include manpower shortages (engineers, technicians, and R&D personnel); weaknesses in managerial expertise on the part of local entrepreneurs; an absence of laboratories for testing as well as R&D; and a general lack of technology transfer from multinationals.158

These weaknesses are especially serious in light of what is rapidly become a significant threat from China. China will, of course, constitute a significant buyer of Thai natural rubber. But Chinese technological advances are also beginning to close off opportunities for Thai producers in products such as inner tubes as well as rubber- and tire-related products.159

Beyond the immediate threat, moreover, China has developed rubber-related research and technology institutions that already far outpace anything seen in Thailand.160

2. Policies and Institutions: This mixed record reflects institutional strengths in NR cultivation and export management and significant gaps in other areas.

NR Cultivation: Impressive yield increases resulted from active support from Japanese rubber producers (Bridgestone and Firestone), as well as from the FAO and the World Bank. The latter helped create the Office of Rubber Replanting Aid Fund (ORRAF)in the early 1960s, a time when the Thai government recognized the need to replant old rubber holdings with modern high-yielding varieties. ORRAF was established to administer a rubber replanting scheme. Using funds from a cess on rubber exports and state budget subventions when necessary, ORRAF helped smallholders with assistance in kind (e.g. high-yielding clonal varieties) and in cash. The latter were critical in mitigating farmers’ lack of income during the long maturation period of new trees. Also important was the Rubber Research Institute of Thailand (RRIT), established within the Ministry of Agriculture in 1965 156 Interview (July 14, 2008). 157 Somsak (2009, p. 5); interviews and factory visits (2008 and especially July 2009). Interviews in 2009 were conducted with Prof. Patamawadee Suzuki, Faculty of Economics, Thammasat University. 158 Somsak (2009). 159 See for example, "Impacts from Cheap Motorcycle Inner Tube from China," in he Rubber International, 11:2 (February 2009). 160 Interview with Prof. Somsak Tambunlertchai (July 2009).


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with support from FAO, which was encouraging the establishment of research institutions for all key agricultural products in Thailand. The Institute subsequently received significant support from Japanese aid agencies and tire producers.161

More recently, rubber cultivation has been threatened by weakening productivity.162 Much of this has to do with market volatility and the fact that most Thai producers are smallholders and most of these (85%) rely on "sharetappers" (many of whom are migrants). As prices fall, smallholders and sharetappers have tried to raise output by more frequent tapping, a practice that reduces the productive life of trees and reduced latex yield per hour of tapping labor.

In response, the government has emphasized redistributive efforts, especially price support programs, as well as increased marketing efforts. Through the RRIT, the government has been active in establishing effective “central markets” that help increase farmer income byestablishing benchmark prices used by all, including private traders. The value of price support programs have, however, been challenged as wasteful at best.163 Perhaps most disturbing, less emphasis has been devoted to productivity improvements than to marketing and redistributive measures.

This lack of attention to productivity is in part a function of the fact that demand for natural rubber had been generally strong, yielding decent incomes for smallholders. But a more important factor has been weakening of the institutional network constituting the sectoral innovation system in rubber.164

This is especially the case for the RRIT, which is responsible for R&D and for “service,” especially testing of product quality for intermediate processors. The RRIT suffers from significant shortages of technical personnel. Its links with local universities are weak, in part due to different functions: The Institute’s focus on solving immediate problems is at odds with the longer-term goals of university researchers. The relations between RRIT and ORRAF are also not as close as they were around 15 years ago. ORRAF was originally to implement the practices developed by RRI, i.e. RRIT was to train ORRAF staff and ORRAF was to teach farmers. This division of labor is less clear than in the past. Also problematic are the links between RRIT and local processors. Whereas processors may bring samples to be tested in RRIT labs, the processors rarely explore problems of production processes with Institute staff. The focus of discussions is typically on market share, not technology. This problem is compounded by the weakness of the core association, the Thai Rubber Association. As one manager noted: “There are few if any technology-related activities in the Association. Each firm keeps things to itself. And this lack of cooperation is striking since four of the big firms are actually from the same family; they’re relatives and yet they never help each other out.” When one combines this lack of inter-firm trust with the technological weaknesses of the RRIT, the lack of links between the two is not surprising.

161 Several RRIT technical personnel were sent to Japan, where they worked and studied in Bridgestone plants. Interview with RRIT official (Hat Yai, January 2009).162 World Bank (IEG) n.d.163 Suzuki (2009).164 The following assessment is drawn from interviews with officials of ORRAF and RRIT, as well as with university faculty and managers of rubber processing plants, (Hat Yai, January and May 2009).


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Downstream Weaknesses: Underlying the preceding problems is a more pervasive lack of industry-wide coordination that also plagues efforts to promote downstream, rubber-based industry production despite widespread recognition of the need for such development.

The failure of Thailand to expand production and exports of "bias," i.e. non-radial (non-steel using) tires is the most striking example of this problem.165 Such tires are used in farm equipment, forklifts, gardening equipment, toys and thus have significant market potential. The requisite technology is not advanced; indigenous Thai producers do exist and act collectively. Their association, the Rubber Products Industry Club, asked the government to promote these tires several years ago. The producers have asked that the government 1) support the creation of testing and standards facilities, and 2) subsidies or incentives for new equipment purchases.

There has been some progress in the area of testing and standards. A professor of polymer chemistry at Mahidol University has established a Center for Rubber Research and Technology at Mahidol with support from MTEC - Materials Technology Center (within MOSTE), as well as from local firms in the Thai Rubber Products Industry Club. Building on its testing and standards service, the Center's goal is to find ways to increase productivity of and quality of Thai latex, and to improve NR utilization of NR for manufactured goods. The Center has 14 researchers and 6 assistants but suffers from inconsistent support from both private and public sources. Members of the Industry Club are small, indigenous firms with few resources. Lack of government support reflects a bureaucratic structure that has no effective room for mid- or downstream promotion. The Ministry of Agriculture and Cooperatives focuses only on agriculture while the Ministry of Industry supports existing factories, not technology promotion in agro-related manufacturing. Neither actively supports the promotion of upstream-downstream linkages.

The director of the Center for Rubber Research and Technology has essentially given up trying to work with traditional line ministries. His experience is consistent with that of a young engineering professor at Mahidol whose team, with support from the Thai Research Fund, conducted an extensive analysis of rubber production, especially in the Northeast.166 The goal was to assess the possibility of increasing value added in the rubber value chain in anticipation of an FTA with China. The team presented its impressive study in a road show; they held public hearings; they sent the findings to relevant agencies. But while rubber products firms in the FTI reacted quite positively, the response from government agencies was largely silence.

This fragmentation in turn reflects the absence of an actor capable of coordinating the diverse private sector segments of the rubber value chain as well as the corresponding state agencies: the Ministries of Industry and Agriculture; the various extension agencies operating in the ministries, ORRAF; and the Rubber Organization of Thailand (a state enterprise that grows its own rubber). There have, in fact, been multiple proposals for cross-agency bodies such as

165 Thai producers of bias tires include Vee Rubber, Deestone....others?166 Interview by author with Prof. Suzuki, Engineering Dept., Mahidol University, (January 2009).


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a "Rubber Industry Policy and Management Committee" of a "National Rubber Council." These have come to naught in the face of competing ministerial plans.

Politics and interests encourage this fragmentation. Thailand's coalition politics leads to frequent ministerial shuffling which, at the very least, force associational leaders to try and educate new, uninformed ministers about the challenges of their industry. More problematic are episodes of official malfeasance.167 A final political consideration involves the Democrat Party. As the dominant political force in the South, the Democrats prime concern in rubber has tended to be the (short term) protection of smallholder incomes. In practice, that means an emphasis on prices rather than longer term efforts to improve technology. It has also meant that Democrats view moves to expand rubber cultivation in Thailand's North and Northeast as political challenges rather than developmental opportunities.

Politically inspired, intra-state rivalries encourages fragmentation in an already quite diverse private sector. Firms rarely cooperate with each other, even within associations, on productivity issues, and inter-associational coordination is rare. All of this leaves downstream Thai producers with little policy leverage, while multinationals in condom and tire production are able to operate profitably on their own.

The lack of policy leverage on the part of indigenous downstream producers is especially damaging to the educational component of the innovation system in rubber. It effectively weakens private sector demand for and linkages with educational institutions capable of recognizing and helping to address the private sector's technological needs. This is evident in the difficulties faced by Mahidol. It can also be seen in the case of Kasetsart University. Kasetsart should be the natural starting point for collaboration given the fact that RRIT is located in the university. But the Institute is supported financially by the Ministry of Agriculture and Cooperatives is less interested in the promotion of rubber-related products than in NR yield and exports. The Ministry also manages export taxes (of upwards of 2 billion baht per year) and, in the view of industry participants, devotes much of this revenue to political and policy advocacy purposes rather than research.168 The university best linked to the rubber industry is Prince of Songkla University, an institution located in proximity to rubber cultivation and processors. PSU seems to do a good job of providing relevant curriculum and trained personnel to midstream processors of latex, block and sheet rubber. But there is little indication of linkages with downstream producers.

V. The Political Economy of Thailand’s NIS and Higher Education

The preceding supply-side focus on Thailand's relatively weak NIS and, more specifically, its higher education component, might imply some inherent, cultural limitations on these

167 The most prominent case involved 44 people, including state officials, accused of irregularities in the purchase of 90 million rubber saplings for planting in the Northeast. ("Newin admist sapling support," Bangkok Post., May 13, 2009). 168 Interview, Bangkok 7/30/09


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institutions in the country's NIS. While not minimizing the impact of traditional norms and practices, we believe that they are neither sufficient explanations nor purely exogenous. Afull account thus requires attention to the factors that influences Thai leaders' willingness to devote political and financial resources to higher education and other components of the NIS. We address this question by exploring three sets of factors: 1) the nature and consequences of Thailand's overall development strategy; 2) the structural sources of that strategy; and 3) the more proximate, political factors through which demand factors get filtered. This last point merits special note, for it helps to explain the significant level of bureaucratic fragmentation noted at various points in previous sections of this paper.

A. Thai Development Strategy

At the risk of oversimplification, we identify four general stages in Thailand's approach to development.169 A central theme of these stages is that Thailand's development policies "have only favoured structural widening...the entire export-oriented sector has not developed import-replacing linkages."170 As such, Thai strategies have not pressed domestic firms to engage in technological upgrading and to demand the kinds of educational institutions needed to support such upgrading. That they have not done so reflects the country's generally passive approach to comparative advantage and to foreign direct investment.

1. The first stage, running from the mid-19th century through the 1960s was characterized by impressive expansion and diversification of agricultural exports, along with a gradual increase in manufacturing.171 These structural changes did not result from pure market pressures. They instead involved astute policies and impressive institutional capacities in two key areas: macroeconomic stability and risk socialization. Key in this period were organizations such as the Bureau of the Budget, the Finance Ministry, the Board of Investment, the Thai Bankers' Association and the Rice Exporters' Association. Largely missing were any explicit efforts to improve productivity. Two significant exceptions to this pattern were the creation, in the 1950s, of a graduate program in agriculture that encouraged Thailand's "first wave" of diversification from rice, rubber and teak into upland field cropsand the formation of a few research institutes for manufacturing with the help of foreign governments, primarily Germany and Japan. Yet despite new agricultural research, yields remained generally low, as did backward linkages and value added in manufacturing.

2. In the second stage, covering the 1970s, the economy diversified further, both in agriculture and in manufactured goods and exports (manufactures as a percentage of exports rose from 8.5% in 1970 to 32.33% in 1980).172 This growth was largely consistent with Thailand's comparative advantage in agriculture and labor-intensive products. In agriculture, efforts to improve productivity in areas such as rice largely failed, whereas new financing measures, involving both government and commercial banks, did encourage an extension of cultivation and the growth of agribusiness. A similar pattern emerged in rubber where,

169 Unless noted, this summary draws on Doner (2009, Ch. 4). 170 Rasiah (2003, 60). Rasiah's judgment is meant to apply to Malaysia as well. 171 As of 1970, natural resources occupied the top five spots in Thai exports: rice, natural rubber, maize, tin and tapioca (Suehiro 2008, p. 134).172 Muscat (1994, p. 153).


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beginning in the 1960s, the World Bank initiated an expansion of cultivation and an improvement in yields. But as of 1975, one observer judged that the quality of Thai sheet rubber exports was “notoriously low” based on production methods that had not changed for many decades.173

The government did, however, begin active promotion of manufacturing, with auto parts a primary focus. But this effort took the form of protection and local content; there were no significant measures to promote productivity. Indeed, Thailand became more protectionist during the 1970s, with a doubling of the average effective rate. Yet this system did not encourage linkages and technology absorption. Tariffs and business taxes favored vertical integration, not supplier development. And unlike in the NICs, the Thais did not offset temporary protection with exposure to competition. The principal goal of protection was revenue generation: import tariffs accounted for one-quarter of tax revenues in the latter 1970s. The government also began to promote exports through duty rebates and tax concessions. Yet these were neither extensive nor designed to encourage protected firms toward greater competitiveness. They were instead the origins of what would later be termed "export-oriented protectionism."

3. The third stage runs from the early 1980s through the 1997 Asian financial crisis. This was a period of impressive growth and diversification. Driven in part by foreign investment, manufactured exports rose five-fold during the 1980s and the country continued agricultural diversification into new products such as advanced aquaculture. Also significant during this period were the promotion of industrial inputs and infrastructure to deepen import substitution and to support the growing export sector. Intensified export promotion was indeed key in this period, involving astute macroeconomic policies, such as devaluation, improvement in trade administration, and a reduction of protectionist measures such as local contents requirements. During the 1980s, these measures also involvedsignificant institutional shifts, especially deepened public-private consultation that led to improvements in trade administration and that helped to create a clear sectoral strategy for the country's highly successful tourism industry.

However, this impressive record did not involve significant efforts to encourage technological upgrading by local firms. A serious effort by Thai technocrats to promote domestic linkages and competitiveness in the mid-1980s, represented by the above-noted RESCOM, foundered in the face of FDI inflows and export resurgence. Significant trade liberalization in the early 1990s, involving tariff reductions, the creation of AFTA, and the end of bans on imports and new factories, was accompanied by a series of technology promotion efforts, including soft loans, supplier development schemes, and the creation of industry institutes designed to support upgrading by local firms. None of these had much impact.

4. The final period runs from the 1997 financial crisis to the present. The crisis stimulated an explicit effort at industrial upgrading in the form of the ill-fated IRP noted earlier. Subsequently, Prime Minister Thaksin initiated a number of programs explicitly designed to encourage upgrading by Thai firms, especially in sectors such as tourism, food, 173 Stifel (1975, 636, 639)


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textiles and autos, in which Thailand had a strong track record. These efforts involved sector-specific "master plans," a requirement that the Board of Investment focus on technology development rather than job creation, elevation of industry-specific institutes, and the creation of a National Committee on Competitiveness.

These initiatives did little to intensify local demand for technology and technology-supporting institutions. In addition to the fact that the financial crisis itself wiped out significant numbers of local manufacturers, four sets of factors were central to these problems, as well as the more general weakness in local demand for technology inputs.

First, Thailand's trade and investment regimes have favored foreign manufacturing firms over domestic enterprises, especially after the 1997 crisis. The auto industry is illustrative: To promote auto production after the crisis, the government cut excise taxes, negotiated FTAs, lured new investors with special incentives and infrastructure, and guaranteed access to otherwise-protected raw materials and intermediates for direct exporters or where suitable local inputs were not available. Since foreign firms dominated the export sector, they, not local auto parts producers who were already significantly weakened by the 1997 crisis, benefited from such incentives. At least in sectors such as electronics and automobiles, this has amounted to a policy of denationalized industrialization.174

Second, Thailand's S&T promotion strategy has suffered from important conceptual weaknesses: a focus on R&D rather than other technology development activities (e.g. process improvement, engineering and design) that are more feasible for local firms (given the MNCs control of product development); a tendency to separate state-based R&D from firm-level innovation processes; and a failure to integrate technology policy into other areas of economic strategy, especially the trade and investment regimes.175 The lack of support and pressure for technology development by domestic firms has undermined these firms' "absorptive capacity" and thus their ability to take advantage of potential FDI spillovers. Thailand thus conforms to Yusuf and Nabeshima's category of a "passive FDI-dependentlearning country."176 Third, the failure to integrate S&T promotion into related policies is in part a result of persistent the persistent bureaucratic fragmentation reviewed above.

Finally, the investment boom of the 1985-95 period, combined with Thailand's strategy of investment liberalization, has fostered powerful business interests able to survive without access to sources of technology and innovation. Here, a shift in the attitude of Thai business toward FDI liberalization merits note.177 In the late 1980s, the large FDI inflow prompted the cabinet to allow the BOI to screen FDI and to enforce technology-transfer mandates in return for promotional incentives. The Federation of Thai Industries successfully opposed the measure for fear that Thai business itself would lose authority to

174 “After two decades of government policy nurturing a domestic automotive industry, the bulk of the sub-sector was transferred into foreign ownership…only a handful of domestic firms remained as serious participants (Pasuk and Baker 2008b, p. 14). 175 The most nuanced treatment of this subject is Felker (2003, espec. p. 140-141). See also Intarakumnert et al (2002); and Ritchie (2007).176 Yusuf and Nabeshima (2009, p. 159, fn. 1).177 This discussion is based on Felker (2001, pp. 142-143; 163-166).


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government officials. Thai business essentially wanted both continued protection and access to promotional incentives.

Some three years later, the BOI again moved to liberalize investment incentives (e.g. allowing 100% foreign-owned subsidiaries to sell in the domestic market) and to focus on facilitating industrial upgrading. This time, however, Thai business acquiesced. This was in part a function of divisions within the private sector, with some large groups in agro-processing and light manufacturing supporting liberalization. But equally important was a modified calculus on the part of Thai industrial interests who now viewed FDI, even without restrictions, as beneficial. This was in part a result of local business' recognition of its inability to occupy prominent positions in advanced manufacturing in the face of foreign firms' technological superiority. For example, Tanin, Thailand's leading indigenous TV producer had failed to fully master core color TV technology; as a result, the firm sold off most of its operations.178 In addition, local producers assumed that the country's booming economy would continue to provide them opportunities, albeit in areas less demanding of technological expertise.

B. Structural Sources of Development Strategy

The preceding indicates that, despite "advanced lip service," technology transfer and competitiveness have generally not been "high enough on the economic development agenda of core ministries and agencies..."179 Why is this the case? We suggest that these strategies reflect the opportunities and constraints facing Thailand's political leaders and top bureaucratic officials.

Our argument, in sum, is that the country's moderate external security threats and weak popular pressures limit claims on financial resources for military and welfare needs, even as plentiful natural resources and low-wage labor provide resources to political leaders when necessary while also allowing domestic capital to survive.180 The result has been low pressure on political leaders to help create technology-related higher education and/or to fuel private sector demand for such institutions.

External Threats: Although finding itself in a conflict-ridden region, Thailand has engaged in little actual combat, especially outside its borders, and its leaders felt little pressure to invest resources in military modernization. Siamese kings were, as noted above, significantly slower than Japan even to establish a Ministry of War; technology absorption and development for military purposes was never a priority. This was a reasonable response to the country's external context: In effect, "the real external security of the Thai monarchical state had been guaranteed by the European imperial powers." As a result, "between roughly

178 A similar fate awaited the country's main engine component's producer, Siam Nawaloha, after the 1997 crisis.179 Schiller and Brimble (2009, p. 67). 180 See Ritchie (2010) for a quantitative analysis of the direct and interactive effects of resource endowments, military vulnerability, and popular unrest. These three variables comprise the concept of “systemic vulnerability” (see also Doner, Ritchie, and Slater, 2005).


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1840 and 1940 the state ceased not only to engage in warfare but even to seriously contemplate doing so."181 During WWII, the country avoided serious conflict by first siding with Japan (which occupied Thailand), and subsequently, as the tide turned against Japan, provided support to the Allies with intelligence and moderate resistance.

By the late 1950s, the country found itself in the midst of Cold War tensions as reflected instability in Indo-China and a more assertive China. But these threats were nowhere near as serious as those faced by, say, Korea or Taiwan; and they were offset by U.S. security guarantees as well, as noted below, by U.S. financial aid. External conditions worsened in the 1970s with the U.S. defeat in Vietnam and the fall of Cambodia to the Khmer Rouge in 1975. Further, China's explicit support for Thailand's domestic insurgency coincided with the withdrawal of U.S. forces and consequently the rapid reduction of U.S. military aid. But these threats eased with Thai- and U.S.-China rapprochement. The security situation continued to improve in the 1980s: Vietnam's decision to withdraw from Cambodia and to focus on its own development transformed Indochina from a threat to a market of almost 100 million potential consumers.

Popular Unrest: Popular unrest in Thailand has been fairly limited and episodic. During the 19th century, the country experienced none of the anti-colonial mobilization seen elsewhere in the region.182 In the late 19th and early 20th century, Chinese workers, many of whom were concentrated in strategic economic sites, such as rice mills and ports,conducted strikes, one of which, in 1910, paralyzed Bangkok business for three days. These actions did not spread, as the government responded with a class-based strategy that divided the Chinese community: "labor leaders were jailed and deported, while businessmen were left alone."183 After WWII, the Communist Party of Thailand (founded in 1942) did begin to organize urban labor. In response to a rise in strikes and demonstrations, the (military) government destroyed the labor opposition in part through a lowering of food costs and in part through a "Peronist surge" that involved legalizing unions and basic labor rights, bringing public utilities under state management, and in a sort of "military corporatism" that was to continue into the 1990s, creating in-house organizations to control government workers.184

More serious and sustained popular unrest occurred in the countryside. Domestically, there was significant concern that regional instability might stimulate unrest in Thailand's historically poor Northeast region, where the Communist Party of Thailand (CPT) launched an insurgency in 1965. By the mid-1970s, the government estimated that some four million people lived under some degree of Communist influence. This rural movement began to link up to an upsurge in urban activism stimulated by growth-inspired urban migration, expanded secondary and university enrollment, and growing factory and white collar workforces. These urban forces, especially students, were key to the overthrow of authoritarian rule in 181 Anderson (1978, p. 202). For an excellent illustration of the significant impact of national security concerns on Japan's demand for technology development, see the case of the shipbuilding technology in Fukasaku (1992). 182 Baker and Pasuk describe popular sectors as "bystanders at the creation of the Siamese nation-state" (2005, 79). 183 Baker and Pasuk (2005, p. 115). 184 The terms "Peronist surge" and "military corporatism" are from Pasuk and Baker (1995, 186)..


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1973. The communist movement was subsequently undermined by a combination of military repression, dwindling Chinese support, and, quite significantly, a land frontier into which land-hungry farmers could move and which made it "possible to extract resources from agriculture without impoverishing the peasantry..."185 Concerns with rural unrest persisted in the 1980s, but popular sectors were typically absorbed by the growing role of rural-based representatives in Thai legislatures.

Popular unrest again emerged in the wake of the 1997 crisis as farmers demanded debt reliefand, in some cases, occupied empty land. In the end, these did not constitute a cohesive movement. Although significant problems of inequality, especially across the rural-urban divide, persisted and even intensified, these issues lent themselves more to the populist electoral politics of Prime Minister Thaksin than any serious effort to improve productivity in either the countryside or urban-based industry. The relatively weak popular movements described above are themselves in part a result of the country's access to resources.

Resource Access - Commodities, Exports, Aid:186 Although Thailand is not characterized by rent-generating point-source resources such as large oil or copper deposits, the country is considered "resource rich." As such, it has, since the mid-19th century, benefited from access to revenues that required advances in areas such as finance, trade policy and infrastructure, but not technology. "Vice taxes" on consumption of opium and alcohol by immigrant Chinese workers provided between 40 and 50% of total state revenues during most of the second half of the nineteenth century and a third of state revenues as late as 1927. Financial reforms and the ending of the unequal treaties gradually shifted therevenue base away from labor and Chinese vices to "the production and profits of the agrarian frontier," with taxes on trade and transit rising from roughly two percent of government revenues in 1892 to over 20% in 1927. By 1950, the country was heavily dependent on indirect taxes, especially from commercial service and rice trading. 187

During the 1950s and 1960s, potential hard-budget constraints due to a post-Korean War depression and drought-induced declines in crop production were offset by two factors. First, U.S. military expenditures, especially in the 1960s, “provided sufficient exogenous foreign exchange earnings to free Thailand from the reserves constraint that might otherwise have materialized as economic conditions turned less favorable.”188 Second, the country's large land frontier made it "possible to extract resources from agriculture without impoverishing the peasantry and to build an indigenously owned commercial banking system and an import-substitution base in Bangkok behind protective barriers"189

Thailand faced two potential challenges in the 1970s: the first oil crisis and the loss of U.S. military spending in 1975. But these were offset by a still-not-exhausted land frontier, significant global rises in food and commodity prices, remittances from increasing numbers

185 Rock (1995, 13).186 Unless noted, this review draws on Doner (2009, Ch. 4). 187 Ingram (1995, p.p. 37-38) reports that rice export revenues jumped from around five million baht in the early 1870s to over 108 million baht by 1919.188 Muscat (1994, 101).189 Rock (1995, 13).


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of Thais working in the Middle East, and Japanese investment. There was also significant growth in public sector borrowing of petrodollars from global commercial institutions. By reducing foreign exchange constraints, these financial inflows facilitated what one observer labeled "debt-financed growth" in the latter half of the decade, funded increases in defense spending, and weakened the need for upgrading.190

During the 1980s debt crisis, Thailand faced high levels of external indebtedness; growing foreign exchange needs due to the capital-intensive nature of Thai manufacturing; high costs of petroleum imports (Thailand had become the fifth largest petroleum importer in the developing world); and problems in the agricultural sector that threatened the country's ability to finance imports through agricultural exports. As a result, "no previous Thai government had been under…(such)… severe and sustained economic pressure..." 191 Not surprisingly, these challenges prompted macroeconomic reforms and a more determined shift to export promotion. The success of these moves was bolstered, however, by important exogenous shifts: Realignments of the world’s major currencies, combined with a Thai devaluation in 1984, cut the costs of Thai goods almost in half. In addition, rising labor costs in Japan and the East Asian NICs encouraged a jump in FDI to Thailand from an annual average of $150 million between 1970 and1985 to $1.4 billion a year for the 1986-1994 period. With abundant resources generated by institutional strengthening and external changes, Thailand had little need to address technological weaknesses addressed by theabove-noted Restructuring Committee during the mid-1980s or those noted by research on the problems of Thailand's supplier base in the mid-1990s.

The 1997 financial crisis was a wake-up call as to the dangers of stagnant productivity, signifying the "end of the era of 'cheap labor." This prompted intense, but short-lived,attention to technology development through the above-noted Industrial Restructuring Project. In effect, these crises conditions were significantly moderated initially by foreign, especially Japanese, aid and by a devaluation-supported expansion in exports. As seen in Table 13, exports expanded from roughly 40% of GDP in 1996-97 to 73% in 2007.

Table 13:East Asian Export of Goods and Services as % of GDP

South Korea

China Thailand Indonesia Malaysia Philippines Singapore Vietnam (1)

1996 28 20 39 26 92 41 - 36 (1990)1997 32 22 48 28 93 49 -1998 46 20 59 53 116 52 -1999 39 20 58 36 121 51 -2000 41 23 67 41 120 55 -2001 38 23 66 39 110 49 1912002 35 25 64 33 108 50 1932003 38 30 66 30 107 50 2122004 44 34 71 32 115 51 2252005 42 37 73 34 117 48 238 70

190 Jansen (1997: chp. 4).

116 Muscat (1994, 195; italics added).


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2006 43 40 73 31 117 47 2462007 46 42 73 29 110 43 231

Source: World Bank, World Development Indicators(1) United Nations data (?) cited in Kohli (2009, Table 5)

In sum, external investment and aid, along with natural-resource and labor-intensive manufactured exports, reduced fiscal pressure on Thailand to promote the kinds of “complementary institutional and linkage development...(required)... to switch to higher value-added activities..."192

Resource Access - Labor: Along with smart macroeconomic policy and infrastructure development, Thailand's success has owed much to plentiful supplies of low-wage labor. Large numbers of immigrant Chinese were critical to the expansion of Siam's agricultural exports in the second half of the 19th century.193 Following WWII, plentiful supplies of labor eased Thailand's development in at least three ways. First, remittances from Thais working overseas, especially in the Middle East, helped to alleviate the country's debt problems in the 1980s. Second, the country's agricultural sector constituted not only a significant source of foreign exchange but also, a consistent. "labor sink:" since 1999, Thai growth has been driven by "the increasing employment of its large reserves of underemployed labor in the rural sector."194

Finally, Thai firms have enjoyed access to a large informal labor force. Pasuk and Baker estimate the country's informal workers account for around 60% of the entire labor force.195 This group includes significant numbers of migrant workers, estimates of which range from 1.2 million to 2.5 million or roughly 5% of the labor force in 2005, contributing to 7-10% of value added in industry and 4-5% of value added in agriculture.196 With some industries requiring more high-tech processes and thus more skilled workers, the large informal sector has contributed to dual labor markets, "held down unskilled workers' wages and slowed down labour-intensive firms' imperatives to upgrade their process technologies."197

192 Rasiah 2003, 66. Similarly, Booth (1999, 311) stresses the negative impacts of “easy to tax” sectors in the ASEAN-4.193 The first Chakri king encouraged Chinese immigration for reasons of economic revival, with roughly 7,000 arriving annually in the 1820s and 14,000 by 1870. Although half typically returned home, the remaining totaled some 300,000 in the 1850s. Some Chinese worked as coolie labors in Bangkok's ports; some planted sugarcane, which by mid-century had become a boom crop and Bangkok's biggest export; some moved upcountry to towns where they became shopkeepers, traders moving local produce to Bangkok, and owners of sugar factories, distilleries, brick kilns, boatyards, tobacco factories, sawmills, and metalworks; some spread inland to plant rubber, grow pepper, and mine tin. (Baker and Pasuk 2005, 32; 1995, pp. 15-15). 194 Lauridsen (2002 158). 195 Informal labor includes those without secure contracts, worker benefits, or social protection, including casual day laborers, domestic workers, industrial outworkers, undeclared workers, part-time or temporary workers without secure contracts (ILO 2002). Estimates of informal labor in Thailand from Pasuk and Baker (2008, p. 72). 196 Figures from ILO (2007); and Huguet and Sureeporn (2005).197 Rasiah (2001, p. 101).


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C. Political Sources of Bureaucratic Fragmentation

At its core, a “political economy” analysis should target the role of interests and institutions on policy outcomes. In this section we first highlight role of two important interests --business and labor -- in the coalitions underlying Thai politics over the past two decades. We then note a key institutional factor -- veto players – in the translation of interests into policy.

Interests: Thailand’s private sector is politically important, yet that importance has not translated into pressure for improvement in the country’s institutions of higher education.198 We have already noted one reason for this – namely, that the combination of Thailand’s lack of pressure on domestic manufacturers, the country’s increasingly liberal approach to FDI, and the 1997 crisis itself severely weakened Thai manufacturers. But a second and related factor involves those sectors of indigenous business that have continued to thrive. Pasuk and Baker have argued that the 1997 crisis resulted in “a silent policy decision to permit transnationalization of manufacturing, but to reserve much of the service sector for domestic capital.”199 Such sectors tend to be oriented toward the domestic market and, to a greater extent than in manufacturing, benefit from "natural" as well as legally derived protection such as licensing and concession arrangements. This sector of business, especially powerful under Prime Minister Thaksin, has not championed the strengthening of higher education. Conversely, the remaining Thai manufacturing firms whose sustained participation in global value chains requires greater access to technology are often small or medium-size enterprises and generally lack significant political influence. In other words, those firms most exposed to global competitive pressures, and thus most well positioned to benefit from improved higher education, seem to have the least voice in policy and institutional development.

Even those sectors benefiting from natural protection may be weakening in light of recent changes in the service sector. Out of three private mobile phone operators, two have foreign partners who control major ownership and management. Tesco from the UK is now a leading discount store chain, after taking over from the CP Group during the 1997 crisis. International hotel chains have also expanded rapidly since the crisis. The transnationalization process of the Thai service sector will be even more intensified after the ASEAN Investment Area will be effective in the year 2010 for ASEAN investors and 2020 for non-ASEAN investors200.

Labor, with very low rates of organization, has even less political influence: Indeed, Thai labor “…has never had an institutional voice in the political arena, except for a brief period between 1973 and 1976” and as a convenient but disposable ally for more dominant political interests.201 One reason for this weakness has already been noted – namely, the large informal sector and consistent supply of migrant workers. By weakening labor’s potential

198 See e.g. Pasuk and Baker (2008b).199 Ibid., (p. 170).200 http://www.aseansec.org/7664.htm201 Schmidt (2002, p. 97). See also Brown and Hewison (2005). Roughly four percent of the Thai workforce is unionized in nine “Labour Congresses” and ten “Labour Federations.” Unions account for 11% of industrial workers and 50% of state enterprise workers.


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for organizational cohesion and political influence, these factors reduce pressure on employers to raise wages and, potentially, to invest in productivity measures. In addition, politically weak labor deprives both business and government of active interlocutors with whom to develop such programs. Unlike other countries, especially Singapore, the Thai government has not looked beyond the traditional confrontation between labor and management over wages to find more productive avenues of involvement of organized labor to improve productivity and quality and hence improve worker incomes.202

This last point merits emphasis in light of the fact that labor involvement can clearly be an important contributor to demand for and provision of technology development and higher education. In the small states of Western Europe, cross-class collaboration was important as a mechanism through which to provide "compensatory political gestures...essential for maintaining consensus" on difficult shifts in factors of production.203 Such overt collaboration was obviously missing in the East Asian NICs, where labor was more repressed than politically incorporated. But labor was not ignored in the NICs. Instead, linking developmental goals and nationalist sentiments, political leaders in the NICs combined broad-based public goods, including strong institutions of higher education, with "strategic repression"204 Popular sectors were de facto growth partners benefiting from compensatory measures that helped not only to foster a consensus on "difficult shifts in factors of production" but also to make that shift an efficient one. The shift to export-led growth in the East Asian NICs prompted leaders to improve labor's access to high-quality, especially technical, education, even as elites remained more resistant to extensive social insurance schemes seen in other regions.

Veto Players and Bureaucratic Weakness: But even if political elites want to promote productivity improvements, they must work through political institutions that provide some actors - “veto players” - with the authority to block changes to the status quo. 205 We are interested not in “institutional” veto players (i.e. those generated by a constitution or other official rules of the political game), but rather the effective number of “partisan” veto players, i.e. those generated by the political game itself. Problems in institutional strengthening and policy implementation can result from either too many veto players, which block needed changes, or too few veto players, which often results in radical changes and time inconsistency. Thailand has usually suffered from too many veto players. From 1979 to 2001, Thailand underwent 25 governing coalitions and 43 cabinet reshuffles.206 Parties used ministerial positions to enhance party and factional power in a continuing process of log-rolls. Ministries are actually rated – A, B, and C in declining order of desirability based on their control over key policy areas, budgets and personnel, projects, etc. The Education Ministry has historically been an A- or B+ ministry: Although it doesn't have the clout of

202 See Ritchie (2010) for a discussion on how Singapore restructured labor focus from collective bargaining to collective skill upgrading to improve productivity and ultimately wages.203Katzenstein (1985, 29-30).204 Gallagher and Hanson (2009, p. 670, 672). See also Haggard and Kaufman (2008). and Kaufman note that in East Asia (and in Eastern Europe), "...repression of the left and labor provided the conditions for policies that encouraged much more egalitarian distribution of social insurance and services and arguably more egalitarian distribution of income" (2008, 22-23). 205 This discussion draws on Doner, Hicken and Ritchie (2009); and Doner (2009). 206 Chambers (2006, 13).


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defense and finance or control over profitable infrastructure of Transport and Communications, Education controls a resource critical for election campaigns: half a million teachers dispersed throughout the country. In addition, Education is responsible for procurement of school equipment involving large funds. All of this contributes to a combination of policy instability, lack of knowledge, and corruption.

The decisive electoral victories Prime Minister Thaksin’s Thai Rak Thai Party in 2001 and 2005 seemed to augur a reduction in veto players. In the event, Thaksin’s victory was based on the incorporation of multiple parties and factions who themselves required access to governmental resources. Thaksin raised the number of ministries and departments from 14 and 126, respectively, to 20 and 143. He also presided over eight cabinet reshuffles involving 55 new appointments from 2001 to 2004. The impact on higher education was clear: The Ministry of Education had five different ministers from 2001 through 2004, and conflict pressures and internal disputes weakened science and technology institutions.

VI. Conclusions

We have made a number of arguments in this paper concerning Thailand’s NIS and the country’s ability to compete in global markets. As reflected in Thailand's education and training system, the country's NIS is generally weak and fragmented. This has both hampered the formation of effective UILs and contributed to a significant gap between the advanced nature of the country’s export structure and the much more modest technological levels in its production processes.

These weaknesses are a product of problems in both supply and demand. Our emphasis has been on the ways in which decisions by state leaders influenced both private sector demand for technology and the institutions capable of promoting such knowledge. Put differently, we have argued that political factors led to institutions whose very weaknesses, especially fragmentation and lack of expertise, stimulated a mirror image in the private sector. This isomorphism can be understood at multiple levels.

1. At the level of development strategy, we have suggested a number of reasons why firms, both foreign and local, have been either lethargic or ineffectual in "demanding" help with technology and innovation. First, smart macroeconomic, fiscal and infrastructural policy promoted extensive growth that has generated foreign exchange and jobs. Second, Thailand’s trade and investment regimes favored foreign manufacturing firms over domestic enterprises, especially after the 1997 crisis. Third, Thailand's S&T promotion strategysuffered from a focus on R&D rather than other technological development activities (process improvement, engineering, design) that are often more feasible for local firms; a tendency to separate state-based R&D from firm-level innovation processes; and a failure to integrate technology policy into other areas of economic strategy, especially the trade and investment regimes.

2. At the level of interests, this strategy has effectively strengthened foreign firms that, in general, have little need for the kinds of public goods in technology and training critical to the growth of indigenous firms. The latter in turn have lost policy leverage as the economy has expanded through assembly- and natural resource-based products. The most


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powerful indigenous business interests are now found in services and areas enjoying natural protection.

3. At the level of politics and institutions, the country's very expansion has fueled both complacency with regard to the promotion of technology and innovation, and unstable coalitional arrangements. These have facilitated the use of ministerial position for particularistic ends. The result has been fragmentation within both bureaucratic and private institutions. Thailand's business associations exhibit little coherence and/or collective focus on productivity improvement.

4. Policy decisions can be traced in good part to Thailand’s unique combination of structural conditions. Relatively abundant natural resource, including informal and migrant labor, coupled with low levels of security threat and weakly organized popular sectors combined to reduce pressures on ruling elites to create institutions that favour innovation. Under these conditions, extensification of economic activities rather than intensification and innovation constituted a reasonable strategy. Such a strategy has required little attention to the development of educational institutions and their links with private producers.

Yet despite this generally gloomy picture at the aggregate level, there is some variation across sectors. At the risk of oversimplification: the automotive innovation system was downright weak; growth in rubber cultivation and yield resulted from institutions such as ORRAF and the RRIT, institutions whose creation owes much to foreign support, even as this arrangement has contributed little to and even undermined, downstream growth; and finally, in disk drives, a nascent innovation system that drew on and strengthened local academic institutions but did little for local firms, was emerging.

Further, as Brimble and Doner argue, other sectors such as shrimp farming have spawned productive university-industry linkages.207 Several features emerge from this account that can help to identify the most likely prospects for productive linkages among government agencies, private sectors, and educational institutions. First, "downstream leadership" is helpful. That is, demand from those producers both requiring domestic inputs and close to final consumers is likely to be most powerful in stimulating local institutional development. Second, small numbers of producers, along with a clear sense of competitive threat, will facilitate collective action and stronger demand among firms for technology and innovation-related services. Third, sectors whose importance for state revenues and/or popular legitimacy are especially likely to garner the attention of political leaders. Put differently, threats to political elites from problems in strategic sectors can be useful.

Our discussion thus points to the benefits of promoting and building on sectoral innovation systems. If this approach is useful, it points not to South Korea or Taiwan as models to emulate, but to aquaculture in Chile, wine production in Argentina, electronics in Penang, and even aerospace in Brazil. Each of these drew on and encouraged the growth of educational or training institutions. And each responded to the kinds of pressures reviewed above.

Such a sectoral focus would suggest a relatively modest but still challenging set of policy goals. Rather than aiming for a total reform of Thailand's educational system and its links 207 Brimble and Doner (2006).


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with industry, it is perhaps more productive to strive for more prosaic but still productive objectives such as testing and standards, market information, and vocational training.


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