The Nation’S Competitiveness

Suvit MaesinceeJuly 21, 2003

Suvit MaesinceeJuly 21, 2003

R & D and R & D and The Nation’s CompetitivenessThe Nation’s Competitiveness

R & D and R & D and The Nation’s CompetitivenessThe Nation’s Competitiveness

http://www.nrct.net/symposium/media2.php?type=wma&id=3

Our OpportunityOur OpportunityOur OpportunityOur Opportunity

Thailand Is Over-Reliant on Resource-Based And Labor-intensive Industries

Export Composition of Six Asian Economies

Source: Conference on Thailand’s Dynamic Economic Recovery and Competitiveness, 1998

Thailand

Malaysia

Indonesia

SingaporeResource Based

Labor Intensive

Scale Based

Differentiated

Science Based

China

South Korea

Resource- Based/ Labor

Intensive Economies

Science- Based/ Differentiated/ Scale Intensive

Economies

Percentage of exports in natural resources

PP

P p

er c

apit

al

• Bolivia

• Russia

• Canada

•Costa Rica• Brazil

• India

• Singapore• Sweden

• Japan

• US

• Malaysia

• Korea

• Germany

• Argentina

Relationship Between Natural Resource Exports and Wealth

• Thailand

The Silent War and Paradigm Lost

Scale Driven Scale Driven EconomyEconomy

Tragedy of Tragedy of the Commonthe Common

Over Over InvestmentInvestment

Shortage of Shortage of DemandDemand

IndustryIndustryRationalizationRationalization

Over Over CapacityCapacity

HyperHyperCompetitionCompetition

Mass Market Mass Market Competitive Competitive

ParadigmParadigm

MassMassCustomizationCustomizationCompetitive Competitive

ParadigmParadigm

Creativity Creativity Driven Driven

EconomyEconomy

New New Competitive Competitive Playing FieldPlaying Field

ParadigmParadigmLostLost

Industry Based EconomyIndustry Based Economy

‘Make and Sell’ ‘Sense and Respond’

‘Goods for Elites’ ‘Goods for Everyone’

‘Mass Market’ ‘Markets of One’

‘Owning Assets’ ‘Gaining Access’

‘Corporate Governance’ ‘Market Governance’

‘Just in Time’ ‘Real Time’

‘Local Economy’ ‘Global Economy’

‘Asymmetry of Information’ ‘Democratization of Information’

‘Economics of Diminishing Returns’ ‘Economics of Increasing Returns’

Industries and Businesses Are Buzzing With Changes

Knowledge Based EconomyKnowledge Based Economy

Source: Marketing Moves

Level of Customization

Lev

el o

f S

op

his

tica

tio

n

High Tech

Low Tech

Low Touch High Touch

Video GamesVideo Games AdvertisingAdvertisingArchitectureArchitecture

ArtArt

CraftCraft

DesignDesign

FashionFashion

FilmFilmMusicMusic

Performing ArtsPerforming ArtsPublishingPublishing

R&DR&DSoftwareSoftware

Toys and GamesToys and Games

TV and RadioTV and Radio

The Emergence of Creative Economy

The Most Important Intellectual Property in the Creative Economy is the Stuff Inside People’s Head

TechnologyConcept

Value

Source: Cagan and Vogel

High

Low

HighLow

Thai

Testing and Support

Coding

Low-Level Design

High-Level Design

Requirement Analysis

Conceptualization

Ireland

Israel

India

Example: Software Industry Value Created

More for Less

More for More

Less for More

Source: Software Park

1948-1970Self Sufficient

1970-1980Export Agricultural

ProductsProductivity Improvement

1980 upExport Know-How

and Technologies

Exp

ort

Lo

cal

Co

nsu

mp

tio

n

Value addedValue added

Agricultural Output

‘000 ton 1967 1982 Growth

Vegetable 70 165 6%

Citrus fruits 98 160 3%

Other fruits 30 80 7%

Field crops 30 60 5%

Beef 10 40 10%

Source: Israel Ministry of Agriculture and Rural Development

Example: Israel’s Agricultural Industry

Can Thailand Compete in the New Competitive Landscape?

World Economy

Thai Economy

Industry BasedEconomy

Knowledge Based Economy

?

Resource and Labor Intensive

International Division of Labor

Investment Driven

Mass Customization Critical Mass Knowledge Intensive Economies of Skills Economies of Speed

Mass Production Standardization Capital Intensive Economies of Scale Economies of Scope

Our CapabilityOur CapabilityOur CapabilityOur Capability

Government Expenditure 1997-2001

Fiscal Year

Fixed Expense

Public Investment

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1997 1998 1999 2000 2001

Mil Bht

Our Budgeting Constraint

International Comparison of R&D Investment

Our Investment for the Future Are Significantly Low

Source: Thailand Economic Monitor, June 2000

0

2.0

1.0

1.5

0.5

2.5

3.5

3.0

USAJapan Korea MalaysiaTaiwan Singapore Thailand

Gaps in Science and Technology (At Current Level of Demand)

We Still Deal With a Wide Manpower Gap in Science and Technology

Source: Lall (1999), Raising Competitiveness in Thai Economy, Country Employment Policy Review, ILO.

M.Eng /D. EngB. Engineering B. Science MS/DS

4,520

10,963

5,874

7,015

180541

(113) (352)

1996

2001

...So We Cast Doubt on Our Ability to Compete

High

Singapore

IrelandThailand

Philippines

IndonesiaChina

France

GermanyUK

India

USA

High

Low

LowEntrepreneurial Capabilities

• Number

• Quality

HR Capabilities

• Number

• Wages

• Skills

Source: Nasscom 1999

Software Industry

The Catalysts for Future Growth Such As Venture Capital Have Lagged Behind Its Competitors

Singapore

Hong Kong

USA

India

Japan

Malaysia

Australia

Vietnam

South Korea

USA

Taiwan

HK/China

Singapore

Thailand

Indonesia

Philippines

South Korea

Australia

PR China

Taiwan

Indonesia

Philippines

Thailand

Malaysia

Venture Capital Assets Under Management (% of GDP)

0.10 0.21

9.173.16

1994 1999

The Same Is Also True for the Incubator Businesses

Incubator Growth

4,000 1,000

US

Germany

E. Europe

UK

France

India

Australia

Canada

Israel

Scan-dinavia

Japan

Thailand

Africa1980 1985 1990 20001995 2005

Incubator by Region/Country

Source: Incubators

Telecommunications Productivity

Our ICT

TFP31-57

Labor Productivity

34-51

Capital Productivity

30-60

Lines/Employee

64

Network Utilization

53-79

Subscribed lines/Unit of Investment

56-76

Installed lines/Unit of Investment

73-100

Subscription Rate76

Index of US (1999) =100; Thai data 1999Source: =McKinsey

+

X

X

X

Thailand’s Current Technology Position

Technology Achievement Index

Leader

FinlandUSSwedenJapanKoreaNetherlandsUKCanadaAustraliaSingaporeGermanyNorwayIrelandBelgiumNew ZealandAustriaFranceIsrael

PotentialLeader

SpainItalyCzechHungarySloveniaHKSlovakiaGreeceBulgariaPolandMalaysiaCroatiaMexicoCyprusArgentinaRomaniaCosta RicaChile

Dynamic Adopter

UruguaySouth AfricaThailandPanamaBrazilPhilippinesBoliviaChinaColumbiaPeruJamaicaIranIndonesiaIndiaSri LankaAlgeriaEgypt

Maginalized

PakistanSenegalNicaraguaGhanaKenyaSudanTanzania

Our Strategy (Structural)Our Strategy (Structural)Our Strategy (Structural)Our Strategy (Structural)

Nation’s Building Strategy

Nation’s Competitive

Position

Economic

Social

The New Competitive Paradigm

The New Competitive Landscape

The New Social

Contract

Driving National Agenda

The Strategic Thrusts

Geo-Politic

Environmental

RegionalRegional GlobalGlobalNeighborhoodNeighborhoodLocalLocal

Local Links Global Reaches

Social Cohesion

International Competitiveness

Efficiency Cost effective Productivity Innovation

Sufficiency Community Building Cultural Identity Family Value

New Competitive Paradigm

Lev

el o

f S

op

his

tica

tio

n

High Tech

Low Tech

FoodsFoods TourismTourism

FashionFashion

SoftwareSoftware

Auto industryAuto industry

Level of Customization

Low Touch High Touch

Potential Global Niches

Cultural Cultural StrengthsStrengths

Cultural Cultural StrengthsStrengths

Craftsmanship Craftsmanship SkillsSkills

Peace of MindPeace of Mind

Delicate LivingDelicate Living

Flavorful SenseFlavorful Sense

New Competitive Landscape

Value addedValue addedPotentialsPotentials

Focus of Focus of Thai ProducersThai Producers

Strategic Thrust

Production MarketingR&D

Talent

Conducive Environment

Value Created

Wealth

Job-Wealth Cycle

Job

Wealth Investment

Capital

Knowledge Wealth Cycle

The New Social Contract

Source: Modified from Plowing the Sea

• System thinking, results form mental models• Integrative, interdisciplinary approaches• Team oriented

• Create wealth through innovation and distribute to most productive people• Law and regulatory framework as enabling investment in innovation• Informal producers increasingly integrated

The Old Direction A New Direction

Social Capital

Human Relations

• Paternalistic• Hierarchical organizations• Individual oriented

• Trust oriented• Interdependent• Meritocratic• Team oriented

Human Capital

• Labors and managers are fungible• Viewed as input costs• General education

• Source of competitive advantage• Source of increasing return on inv.• Education as specialized, focused

Learning

• Linear learning, results form strategy choices and organizational design (single loop learning)• Reductionist strategies• Technical and compartmentalized

Justice and Social Equity

• Redistribute finite wealth• Law and regulatory framework as constraints• Informal producers are marginalized

New Direction of Investment in Human and Social Capital

Our Strategy (Behavioral)Our Strategy (Behavioral)Our Strategy (Behavioral)Our Strategy (Behavioral)

Early Market Mainstream Market

InnovatorInnovatorEarly Early AdoptAdopt

erer

Early Early MajoriMajori

tyty

Late Late AdoptAdopt

ererLaggaLagga

rdsrds

Type of Market

Nature Propensity to Innovate

Propensity to Imitate

Risk Preference

Risk Neutral Risk Averse

Pace Revolutionary

Evolutionary

Pattern Discontinuity

Continuity

Focus Creative Destruction

Productivity Improvement

EnthusiasticsVisionariesPragmaticsConservativesSkepticsProfile

Nature of Entrepreneurs

InnovatorInnovatorEarly Early AdoptAdopt

erer

Early Early MajoriMajori

tyty

Late Late AdoptAdopt

erer

LaggaLaggardsrds

Architecture and Capability Innovation

Platform InnovationProduct Innovation

Process Innovation

Different Stages of Innovation Development

Innovator

Early Adopt

erEarly Majori

tyLate

Adopter

Laggards

IRR Line

Return

Risk

Mature

Growth

Introduction Business

AngelVentu

re Capit

alFixedDebt

Different Types of Business Support

Psychological Issues

Loss Gain

• Delay Gain

• Delay Loss

• Unbundle gains• Bundle losses• Bundle smaller losses with larger gains• Unbundle smaller gains from larger losses

Creating Creating a New Competitive Platforma New Competitive Platform

Creating Creating a New Competitive Platforma New Competitive Platform

Clustering Clustering DevelopmentDevelopment

Knowledge Driven PlatformKnowledge Driven Platform

Emerging

Extending

“Lift-off”

A Cluster Provides a Conducive Platform for the Creation, Diffusion, Adoption and Interaction of Innovation

Creation

DiffusionInteraction

Innovation CycleInnovation Cycle

Strategic Transformation…Clustering Development...

Adoption

Pro

cess

Rel

ated

Market Related

Local

Loca

lN

atio

nal

Inte

rnat

iona

l

National International

Rural Enterprises

FamilyEnterprises Traditional

Subcontractors

Source: Bianchi and Tommaso


Most of Thai Industry Clusters Are Still in the Emerging Stage

Nature of market/customer baseNature of market/customer base

Nature of technology R&D needsNature of technology R&D needs

Nature of human resource needsNature of human resource needs

Nature of capital financing needsNature of capital financing needs

Underdeveloped, narrow, often serving limited local demandUnderdeveloped, narrow, often serving limited local demand

Very specific and high-level; often still relate to spawning entityVery specific and high-level; often still relate to spawning entity

Narrow but high-level; often reliant on a few key peopleNarrow but high-level; often reliant on a few key people

Patient capital required; limited sources often lead to owner financingPatient capital required; limited sources often lead to owner financing

Economic multiplier capacityEconomic multiplier capacity

Ability of attract outside investmentAbility of attract outside investment

Small; employment and economic impacts limitedSmall; employment and economic impacts limited

Low; may attract some state R&D or investment moniesLow; may attract some state R&D or investment monies

Nature of Cluster Linkages in the Emerging Stage is Uneven and Unpredictable






Expanding , diversifying within region, and developing links Expanding , diversifying within region, and developing links outside regionoutside region

Some continuing high-level, but increasing technology applications Some continuing high-level, but increasing technology applications activity and basis “off-the-shelf” equipment needs for suppliersactivity and basis “off-the-shelf” equipment needs for suppliers

Some high-level professional, but increasingly mid-level technical Some high-level professional, but increasingly mid-level technical and marketing needs as well; reliant on an increasingly diverse and marketing needs as well; reliant on an increasingly diverse workforceworkforce

More complex and diverse; venture capital and expansion capital More complex and diverse; venture capital and expansion capital are particularly important and may become more accessible and are particularly important and may become more accessible and cluster increasingly proves its viability cluster increasingly proves its viability



Growing; core firms now have impact on local suppliers and Growing; core firms now have impact on local suppliers and consumer services, etcconsumer services, etc

Emerging; cluster capabilities and synergies may begin to attract Emerging; cluster capabilities and synergies may begin to attract similar firms and suppliers and government/private investmentsimilar firms and suppliers and government/private investment

Some Industries (e.g., Autos), However, Shift their Clusters from the Emerging Phase to the Extending Phase


Enterprises in the Cluster Increasingly Diverse and Sophisticated; Enterprises in the Cluster Increasingly Diverse and Sophisticated; Multiple Coopetitive Relationships EmergingMultiple Coopetitive Relationships Emerging

SME Networks Are Loosely-linked Groups of Small Firms with Some Specific Purposes

Pro

cess

Rel

ated

Market Related

Local

Loca

lN

atio

nal

Inte

rnat

iona

l


Rural Enterprises


Subcontractors

SME Networks


People’s Republic of China

SMEs

E.g., improving technological

efficiency and pooling resources

for export promotion, thereby

accessing international markets


Opportunity for Our Cultural Industry Cluster Development

TourismCreative Industries

Graphic

Product/Packaging

Design

Advertising

Music Video

Web Design

Radio/TV Production

Fashions

Foods

Magazine/Book Publishing


Medium Sized Niche Enterprises Exists in Certain Fashion, Luxury Items of Handicraft Production and High Tech Products

Pro

cess

Rel

ated

Market Related

Local

Loca

lN

atio

nal

Inte

rnat

iona

l


Rural Enterprises


SubcontractorsMedium Sized

Niche Enterprises

SME Networks


Singapore SMEs

--Making sound cards used in

multimedia computing

--In the mid 1990s, together

accounted for three-quarters

of the world market


Both broad and niche markets; state, regional, national, even Both broad and niche markets; state, regional, national, even international customer; some mature marketsinternational customer; some mature markets

Needs at all levels, from technology discovery to commercialization Needs at all levels, from technology discovery to commercialization and application to off-the-shelf equipment development, reflecting and application to off-the-shelf equipment development, reflecting the spectrum of cluster firmsthe spectrum of cluster firms

Very broad and high skill demands; occupations of many kinds Very broad and high skill demands; occupations of many kinds required; institutions are respondingrequired; institutions are responding

Full range of financing needs represented in cluster; good access Full range of financing needs represented in cluster; good access to regional and national sources because of cluster reputationto regional and national sources because of cluster reputation





Extensive; cluster becomes virtually self-reliant, attracting wealth Extensive; cluster becomes virtually self-reliant, attracting wealth and during it over locally rather than exploring itand during it over locally rather than exploring it

Excellent; reputation spreads; major national players tend to feel Excellent; reputation spreads; major national players tend to feel they have a stake in the regional cluster, so relocations/expansions they have a stake in the regional cluster, so relocations/expansions increaseincrease



The Ultimate Goal Is to Develop “Lift-off” Industry Clusters


There are extensive and multiple synergies within cluster; major There are extensive and multiple synergies within cluster; major linkages develop with other regional clusters and/or outside linkages develop with other regional clusters and/or outside agglomerationsagglomerations

From Traditional to Global SubcontractorsP

roce

ss R

elat

ed

Market Related

Local

Loca

lN

atio

nal

Inte

rnat

iona

l


Rural Enterprises


SubcontractorsMedium Sized

Niche Enterprises

SME Networks

Global Subcontractors


Japanese SMEs

--Moving from their

pre-existing domestic

subcontractors to global

subcontractors


Industry Districts Comprise Geographical and Sectoral Concentration of SMEs...

Pro

cess

Rel

ated

Market Related

Local

Loca

lN

atio

nal

Inte

rnat

iona

l


Rural Enterprises


Subcontractors

Industrial Districts

Medium SizedNiche Enterprises

SME Networks

Global Subcontractors



...Undertaking of Joint Action Aimed at Raising Collective Innovation and Efficiency

Source :Marketing of the Nations

• Population 4 millions

• 90,000 SMEs covering 40%

of employment

• Stand alone and subcontractors

SMEs

• Supporting infrastructure:

transports, research center,

financial institutes, university,

laboratories

• Gain advantages of economies of

specialization

• Export-oriented and has capacity

to respond to market changes

and compete globally

Key Features

Emilia-Romagna

Emilia-Romagna In the Nortern Italy Is a Good Example


ClusteringFormation

Physical Capital

Human Capital

Social Capital

Financial Capital

ConnectivityInteractivity

Key Success Factors For Clustering FormationStrategic Transformation…Clustering Development...

Creativity Liquidity

Co-Prosperity

Dynamics of Industry Clustering

PrintingPrinting

InformationServices

InformationServices

FinancialServicesFinancialServices

BusinessServices

BusinessServices

Advanced Advanced Information SystemInformation System

FoodFood

AgricultureAgriculture

TextilesTextiles

ApparelApparel

ChemicalsChemicals

Basic MetalsBasic Metals

ElectricalMachineryElectrical Machinery

IndustrialMachineryIndustrial

Machinery

Metal Products

Metal

Products

Trade, Wholesale Distribution

BankingBanking

ChemicalsChemicalsFoodFood

PharmaceuticalsPharmaceuticals

HealthServicesHealth

ServicesMedical

EquipmentMedical

Equipment

BiomedicalBiomedical

High-FashionApparel

High-FashionApparelChemicalsChemicals

Basic MetalsBasic Metals

PlasticPlasticTextilesTextiles

AdvancedAdvanced MaterialsMaterials

ConsumerElectronicsConsumerElectronics

ComputersComputersIndustrial

MachineryIndustrial

Machinery

CommunicationsEquipment


TransportationEquipment

TransportationEquipment

Advanced Advanced ManufacturingManufacturing

PharmaceuticalsPharmaceuticals Medical ServicesMedical Services

FoodFood

Financial Services Financial Services PrintingPrinting

Information Services

Information Services

Business Services

Business Services

ConsumerElectronicsConsumerElectronics

Industrial MachineryIndustrial

Machinery



BicyclesBicycles

ChemicalsChemicals MetalsMetals

PlasticsPlastics

TextilesTextiles High-Fashion Apparel

High-Fashion Apparel


The New R&D

PersonalAgenda

Organizational Agenda

NationalAgenda

Governing

Directing

Managing

Executing

The Nation’S Competitiveness

Business

Transcript of The Nation’S Competitiveness