Productive Integration

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Productive Integration

• Lessons from Asia and Europe for MERCOSUR
  Thailand Perspective

2
Organization

• General background Economic indicator
• Historical of Industrial and Development Policy
• Productive integration in Asia Thailands
  perspective
• Lessons from Thailand

3
Thailand Economic Indicators (2007)

• GDP 249 billion USD. (current price)
• Population 63 million
• Inflation 2.3
• Trade export 150 billion USD. , import 138.4
  billion USD.
• Degree of openness 115
• Export structure 78.1 from manufacturing sector

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Main export sectors
Source Ministry of Commerce
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Degree of trade openness and average trade tariff
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National Economic Plans
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Trade Policies

• ISI --gt Export oriented (1960s-1980s)
• Thai government committed to liberalize the
  economy trade and financial liberalization
  (1990s)
• Thailand began to negotiate FTAs with many
  countries because of competitive regionalism by
  other Asian countries (to formulate FTAs with
  Japan and the US, Thailands major trading
  partners)
• Thailand tries to integrate with regional trade
  blocs in order to improve competitive advantage
• Private (stakeholders) and public sectors were
  active in the negotiation process of FTA
  (Terdudomtham 2008)

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Thailands FTA
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FDI net inflow Intra- and Extra-ASEAN
Source ASEAN Secretariat
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FDI net inflow by countries
Text
Source ASEAN Secretariat
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Thailands Asian Integration through exportation
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Thailands Asian Integration through importation
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World Trade in Parts and Components (1996-2007)
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Intra-regional trade share
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Two examples

• HDD and Automotive sectors
• Export value gt 10000 mil.USD.
• Export-oriented industries

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Productive integration

• Industrial policies
• Investment promotion
• Develop infrastructure
• HRD
• Create domestic integration (agglomeration)
• Roles of MNEs
• Product fragmentation (trade of parts and
  components)
• Global Production Network or Global Value Chain
• Trade policies

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Thailand Industrial Policies

• The government had specific and clear goal to
  promote
• Reliance on foreign firms to promote supporting
  industries
• Non-discrimination
• Export orientation industry
• Integrated into part of global production network
  of many firms

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Production, Sales, Export (1961-2007)
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Why was Thailands Automotive Industry integrated?

• Government Policies
• Local content requirement (LCR) regulation
• Industrial Estate (from 1972)
• BOI promotion scheme
• Sound macroeconomics policies (outward-oriented
  policies, and trade liberalization)
• Commitment to liberalization abolishment of LCR
• Large market (pickup trucks)
• Economic crisis aftermath

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Reasons for rapid growth in HDD in Thailand

• Industry dynamics
• critical mass of the industry base
• growth of trained engineers/technicians
• cost-effective trained labor pool
• some development of supplier industries
• Policy/environmental factors
• macroeconomic stability
• investment incentives
• reasonable infrastructure
• cheap (or perhaps cost-effective) labor

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Automotive and HDD Clusters in Thailand
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Process of Global Supply Chain Integration
Automotive Sector

• Integration in Thailand (agglomeration) sinces
  1980s
• Integration with ASEAN 3 (vehicles and parts)
  (late 1990s onwards)
• Final products for the rest of the world (2000
  onwards)

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Production and International Trade Network in
Southeast Asia
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Toyotas Production and Supply Network (IMV
project)
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Lessons from Thailand

• The integration process was induced by the
  rationalized industrial policy in 1980s
• Roles of technocrats in designing industrial
  policies (strategic, feasible, fair)
• FDI and MNEs are important players in the process
  
• Roles of institutions and public-private
  cooperation committee (PPCC) in 1980s
• Macroeconomics stabilization
• Infrastructure and regional development Road
  network, Seaport (Japanese ODA was important),
  and HRD

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Lessons from Thailand

• Investment incentive to promote regional
  development and human resource development
• Problems in the development process
• Only large business firms or associations could
  lobby the government in the negotiation process
  of FTAs or EPAs
• Small firms tend to face difficulty in improving
  their competitiveness
• Supports should be provided to the group that
  received adverse effect from the FTA and
  globalization