MULTICRITERION DECISION MODELS MCDM

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Chapter 16
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MCDM application in investment promotion

• Problem Identify industrial activities for
  government promotion
• What?
• Where?
• Instruments of promotion (Privileges) some
  examples
• Tax exemption or reduction (on imported capital
  equipment)
• Tax credit ( on domestic capital equipment)
• Depreciation as tax deductiable
• Reinvestment as tax deductable
• Loan preference
• Etc.
• Decision Criteria for example
• Foreign exchange
• Employment
• Income distribution

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MADM Framework Using AHP
Industries to Promote
Foreign Exchange
Employment
Income distribution
Import
Export
Skilled
Urban
Skilled
Rural
Industry type u in area v, xuv
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MODM Framework Using Compromise Constraint Method
Area, v
1 2 ..v....N
x11 x12 . x1N x21 x22 . x2N
xuv xM1 xM2 . xMN
1 2 .. v . M
Industry type, u

• Decision Variable, xuv Production capacity of
  product/industry type u in area v
• Criterion 1 Max FE
• Max. Export Earning

Unit export price (or export tax if objective is
max. government revenue)
( Min. Export may also be added )
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• Criterion 2 Employment

Number of employees generated per unit capacity
Criterion 3 Income Distribution
For v?U (urban areas)
For v?R (Rural areas)
Constraints
v1,2,,N (Max. Allowable)
u1,2,,M (Self-sufficiency)
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Case study Thailands textile industry

• Industry activities
• u1 Knitted cotton
• u2 Knitted manmade
• u3 woven cotton
• u4 woven manmade
• u5 silk
• Areas
• v1 BKK-Thonburi
• v2 Nonthaburi
• v3 Samut Prakon
• v4 Pathumthani
• v5 rest of Thailand
• Data Export price index Cotton 1.00
  Manmade1.69 Silk16.24
• Employment index Weaving1.0
  Knitting1.2 Silking1.3

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Figure 3. Employment Index Values of Textile
Industry
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Table 2 Model Results for Spatial Distribution
of Textile Firms Note Numbers enclosed in
parenthesis in Table 2 are the normalized figures
obtained by dividing each element of the row by
its highest number
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