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The Politics and Policies of Industrial
Upgrading in Taiwan and Thailand - a comparision

• Faculty of Economics
• Thammasat University
• Laurids S. Lauridsen
• Roskilde University, Denmark

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Introduction (1)

• Monograph STATE, INSTITUTIONS AND INDUSTRIAL
  DEVELOPMENT. Industrial deepening and upgrading
  policies in Taiwan and Thailand Volume I-III
  (1002 pages)
• Thailand during the period 1991-2001 (plus
  appendix 2001-2005) compared with Taiwan mostly
  in the 1980s
• Thailand compared with Taiwan in the 1980s and
  early 1990s
• Policy domains
• Sectoral Upstream petrochemical industry
• Sectoral Downstream plastic (parts) industry
• Sectoral Side-stream mould die industry
• Cross-sectoral SME- and linkage policy
• Cross-sectoral Industrial technology policy
• The middle income trap

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Introduction (2)

• But even as the region celebrates recovery, new
  challenges loom, which could slow or even derail
  growth if not properly handled economies could
  find themselves in a middle income trap and
  struggle to climb onwards to higher income
  levels. History shows that while many economies
  can reach middle income status often quite
  quickly few pass through it because the policy
  and institutional changes needed are more complex
  and more challenging technically, politically and
  socially.
• (World Bank. April 2007. East Asia Pacific
  Update, 10 Years After the Crisis, The World
  Bank, East Asia and Pacific Region).

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Introduction (3)

• Research focus the ability and willingness of
  the state to design and implement an adequate and
  coherent set of strategic industrial policies,
  and the likely impact of such policies on
  industrial deepening and upgrading
• Policy process analysis agenda setting - policy
  formulation - policy implementation - (likely)
  policy impact
• The starting points
• Historical institutionalism - institutional
  arrangements and path dependence
• The development state debate - developmental
  governance

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The Good governance approach

• Good governance (rule of law, control of
  corruption, accountability etc.) market
  sustaining governance that leads to market
  efficiency (low transaction costs) which in turn
  results to economic growth and poverty reduction
• Strong influence in development studies and donor
  practices
• Advanced countries have pretty good governance
• Neither high-growth or low growth developing
  countries have particular good governance
• Differences in good governance weakly explain
  differences in economic performance (sustainable
  economic development)
• Introduces institutional mono-culture (if
  possible)
• Good governance might be desirable on its own -
  but difficult to implement in developing
  countries

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The Developmental Governance approach

• Governance that allows for firmly state response
  to changing circumstances through effective
  implementation of adequate strategies (policy
  decisiveness)
• Growth-enhancing strategies productive
  investments, investments in growth sectors,
  accumulation of technological capabilities,
  technological upgrading (higher productivity)
• Developmental governance
• Implemented by heterodox institutions (formal or
  informal)
• Different strategies and institutional pluralism
• Learning and experimenting
• Specific historical and political context

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Strategic industrial policy

• Nine basic characteristics
• Pro-investment
• Pro-technology
• Pro-competition
• Pro-export orientation
• Strategic integration in the world economy
• Anticipatory (making winners)
• Mixture of support and discipline
• Activity-specific and situation specific
• Coherent and coordinated

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Main findings (1)

• Industrial development before 1990 (1980)
• TW SOE. Private conglomerates, SMEs
  ISI-cum-EOI
• TH Private conglomerates prolonged ISI
• State intervention before 1990 (1980)
• TW comprehensive industrial policy, protect
  domestic learning processes, selective policies,
  TNC guiding and regulation, domestic inputs,
  domestic savings, organisational and technical
  learning, human capital
• TH modest, ad-hoc, accommodating industrial
  policy, certain structural change intervention,
  trade policy guided by revenue consideration and
  protecting vested interests, little TNC
  regulation, weak technological base and
  inadequate education system

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Main findings (2) - Petrochemicals (olefin
plastic resins)

• More similarities than expected
• State control and state leadership - PTT and CPC
• Large (well connected) domestic conglomerates
• Policy coherent and fairly effective
  implementation.
• Entry control Restricted access and favourable
  incentives
• Managed trade (plus guided prices in TW)
• Feedstock pricing give-way-rents versus
  reciprocal subsidies
• Liberalisation (1990s) but financial discipline
  in TW
• Institutional arrangements
• Pilot agencies bureaucratic expertise
• Particularistic state-business interaction
• Local world class producers in TW

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Main findings (3) SME-, linkage- and supplier
development policies

• Deepening of import-intensive ISI/EOI assembly
  industries
• More similarities than expected
• No comprehensive linkage and supplier development
  policy policy
• No comprehensive and coherent SME policy
• But differences in relation to
• Financial assistance
• Technical assistance
• Plastic parts
• Mould Die
• Other relevant policies and incentives in Taiwan

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Main findings (4) Industrial technology policy

• Importing foreign technology- technology
  acquisition
• Promoting and financing private sector technology
  efforts
• Public sector RD - innovation related and
  service-related infrastructural support (MSTQ)
• ST manpower policy - human resources for
  technology development
• Demand side technology policies - direct and
  indirect

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Main findings (5) macro-institutional
arrangements and socio-political underpinnings

• Developmental orientation and urgency
• The internal organisation of the state
• A single party-based authoritarian state versus
  short-lived coalition governments
• Fiscal and monetary control
• Coherent and strong versus fragmented and weak
  industrial policy institutions
• Public-private sector interaction
• The economic organisation of the private sector
• Institutional strength of business associations
• Institutionalised versus particularistic
  public-private links
• Broader state-business relations
• The broader pattern of political competition and
  coalition-building

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