Thailand's Master Plan for Industrial Development articulated its vision for 2012 as: Thai industries being
able to maintain competitiveness in the future with new comparative advantage. It is understood that due to a dynamic domestic
and international environments, the comparative advantages of Thailand are shifting so that it has to give up some advantages
such as labour-intensive, high-import export industries, and to identify new comparative advantages which may be in the area of
low-import export industries, high-tech and high value added products. Under Vision 2012, the state of Thai industries and the
economy will be characterised by:
strong and flexible industrial exporting economy industrial benefits evenly distributed to the rural areas
sustained development of managerial skills and industrial R&D
increased people's participation in obtaining benefits from industrial and mining operations
assurance of product quality, safety and quality of environment, optimal pollution control without damaging communities and the environment
security in raw materials and energy
information based society
The Ministry of Industry has adopted the following industrial policies to achieve the above vision:
a) promote and encourage the establishment of industrial estates and export zones in the rural areas,
b) revitalise existing industries by improving manufacturing technologies,
c) enhance the potentials and capabilities of main export items,
d) control industrial pollution level according to specified standards.
e) promote the establishment of research institutes and develop the quality of institutes and develop the quality of industrial products.
Department of Industrial Promotion
A study report on Industrial Sector Development of Supporting Industries in Thailand (March 1995) prepared by UNICO
International Corporation for DIP and the japan international Cooperation Agency (JICA) included a proposed master plan for the development of supporting
industries but which also affect SMIs in general. The proposal covers six elements, via:
Policy and Legislation
Upgrading of Management
The details appear in Annex 1. Under Policy and Legislation, for components are mentioned: (1) basic law on SMEs development, (2) law on subcontracting promotion, (3) restructuring of DIP and the Japan International Cooperation Agency (JICA) included a proposed master plan for the development of supporting industries but which also affect SMEs and SSIs promotion, and (4) preparation of industrial statistics. Except for the fourth component which was categorized under third priority, the first three components were ranked as first priority for implementation. For many years now, there have been persistent recommendations form many quarters from donor agencies to development practitioners and industry associations, for a basic law on SMEs which would provide comprehensive and clear guidelines for the promotion and development of SMEs. A draft has long been preparaed by DIP, but the proposal did not take off the ground as some key government officials did not perceive the need for such a law, considered it premature of even redundant to existing laws.
The proposed law on subcontracting promotion would have the objectives of providing measures for the efficient promotion of subcontracting arrangements between SMEs and large industries, including international sub-contracting, as well as of upgrading and strengthening the institutions promoting subcontracting.
Existing Institutional Infrastructure Mandated by Government Policy
Besides the Department of Industrial Promotion and the Ministry which were dealt with separately earlier, there are several Acts of Parliaments which directly relate to SME development. These refer to the setting up of the following institutions and regulations.
The Small Industry Finance Corporation (SIFC) was established by Act of Parliament in 1991 in order to increase the capacity of small industries in playing an important role in the economic and social development of the country through extension of long-term credit for the establishment of new business, expansion of existing business and for business improvement. It currently operates 2 provincial branches.
Small Industry Credit Guarantee Corporation (SICGC)
The Small Industry Credit Guarantee Corporation Act of 1991 established the corporation to enable collateral-short but viable small industries to obtain more loans from financial institutions, to increase credit extensions form financial institutions, to small-scale industries (SSIs), strengthen the confidence of financial institutions, in providing to small industries, and to accelerate the dispersal of loans to SSIs.
Industrial Estate Authority of Thailand (IEAT)
The Industrial Estate Authority of Thailand (IEAT) was established in 1979 by virtue of Act of Parliament as a state enterprise attached to the ministry of Industry with the main purpose of planning, developing and managing industrial estates throughout the county. The Act was amended to cover private industrial zones so that owners of factories located in privates industrial zones may be given fair protection. The IEAT has two types of Zones whick require specific privileges: the General Industrial Zone and the Export Processing Zone. Altogether, there are about 45 industrial estates in the country.
Board of Investment (BOI)
The Board of Investment is an agency under the Office of the Prime Minister established in 1977 under the Investment Promotion Act as a tool to help promote foreign and domestic investment in Thailand and to provide assistance in such as areas as guarantees, taxes and monetary incentives. The BOI divides the country into three economic promotion zones with varying investment privileges. The BOI cooperates with DIP and private sector business groups as well as specialised government agencies in developing supporting industries through the National Supplier Development Programme with the objective of developing SMI parts manufacturers. The BOI has set up a unit for industrial linkage development called BUILD to implement its subcontracting development programme.
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Three Factory Acts have been enacted (1969, 1975 and 1979). Among the salient features are the requirement of a permit form the Ministry of Industry before a factory can be operated or before a factory can be expanded or altered.
Other laws also apply for specific industries such as the Foods Acts, Drugs Act, Cosmetics Act, Poisonous Substances Act, etc.
Other relevant laws are the Machinery Registration Act, the Industrial Product Standards Act, Labour Protection Law, Tax Rebate for
Export Goods produced in Thailand Law, Building Construction Control Act, etc.
These laws are enforced to safeguard the health and safety of the workers and the community, protect the environment, and to ensure a conductive working environment.
2. Private Sector Empowerment
Corollary to the trend towards less government will be the natural devolution to empower the private sector to take over some functions of the state, to be a source of specialised services and to regulate its own rank. Prime Minster Chvalit stated that:
Private individuals would be encouraged to establish organisations to control themselves so state supervision could be done away with.
The role of the public sector should be limited to only servicing and facilitating. Such things as construction and building control should be handled by professional organisations from the private sector.
The Seventh National Plan had already advocated the following:
support for private sector role to relieve some public responsibilities, such as examination of industrial plants, machinery and equipment,
as well as examination of laboratories to promote a greater speed and convenience.
budgetary support to private non-profit organisations to encourage training programmes and support activities for SMIs.
encouraging the private sector to expand joint venture agreements in foreign countries.
The Department of Industrial Promotion (DIP) has supported this policy in various ways through:
sponsoring the establishment of the Productivity Institute as a private body with government support to provide consultancy service to private industry in the areas of productivity and quality management. This meant turning over the consultancy function of DIP's former Industrial Productivity Division to the new institute.
sponsoring the establishment of the Textile Institute as a private body similar to the above. This meant turning over some responsibilities of DIP's Textile Industry Division to the new institute.
setting up of a Consultancy Fund so that SMI clients can access private and non - DIP consultants through government subsidy.
subcontracting studies and surveys to private sector institutions.
sourcing outside DIP for resource persons of training programmes and projects such as the Belgian Government-assisted Off-Farm
Job Creation Project which is subcontracted to CARE.
sponsoring the formation of industry associations such as the Thai Mold and Die Association and the Textile Industry Association so the they
con conduct seminars and other activities on their own.
As a natural consequence of the two factors above - less government and more private sector involvement, there will be a more dynamic public-private sector partnership insofar as sharing of decision making and responsibility for planning, implementing, monitoring and evaluating programmers and activities affecting SMEs as part of a work sharing, cost sharing concept.
More active involvement could be expected form the private sector as an advocacy body, as a consultative
advisory group, as joint sponsor and as member of joint public-private sector body such
as the Joint Private and Private Sector Consultative Committee (JPPCC)
which is the highest public-private sector joint body chaired by the Prime Minister and having its equivalent setup in the provinces.
The Thai Chambers of Commerce, the Federation of Thai Industries and the Thai Bankers Association are represented in this body. The various committees of the Board of Trade are actively involved in government consultation. Industry and trade associations are also active as a lobby group, in regulating their own ranks and in providing service to their members in terms of training, information, consultancy, business matching, joint marketing, transfer of technology and organising trade fairs, exhibitions and study missions abroad.
3. passage of Laws and Regulations
Due to the ever growing importance of SMEs as an economic and political force and the real need to strengthen the competitiveness of the sector. There will be increasing pressure in Thailand to emulate the example of the United States, Japan, Korea, Philippines and Taiwan in formulating specific laws that directly affect SMEs. These new laws could revolve around:
a basic law on SME promotion (as previously mentioned) containing such provisions as:
- creation of a centralised policymaking or coordinating body responsible for SMI development and to be composed of relevant ministries and specialised agencies with strong private sector representation.
- Incentives for efficient and priority industries as well as industry clusters
- Comprehensive package of measures to promote the sector
rural industrialisation promotion
structural adjustments and stabilisation measures
innovative financing schemes
private sector promotion and participation
It would also mean that private organisations would become more involve in SME promotion and economic
development in general.
With the passage of a proposed basic law on SMEs, it is expected that there will be a mushrooming of non-governmental organisations,
private organisations and even small enterprise associations, foundations or institutes which will be attached to leading universities, large companies and non-profit organisations. These will cater to the needs of SMEs in terms of training, research, consultancy, etc. This would mean an enhanced role for existing private organisations such as the FTI, Chambers of Commerce, Board of Trade, Institute for Management Education of Thailand (IMET), Propulation and Community Development Association(PDA), and the Thailand Development Research Institute (TDRI), industry and trade associations, among others. This would also mean more autonomy on the part of government corporations whose operations directly affect SMEs, such as the Small Industry Finance Corporation (SIFC), Industrial Finance Corporation of Thailand (IFCT), Small Industry Credit Guarantee Corporation (SICGC), including the Industrial Estate Authority of Thailand (IEAT), among others.
4. Standardization and Simplification
The will be standardisation and simplification of regulations, forms training, operating systems, etc. so that these will be become more customer oriented and user friendly and con readily be replicated on a mass scale for greater access by the people without sacrificing quality. These moves will definitely benefit SMIs especially in the rural areas.
5. Massive Use of Information Technology
Recognising the benefits and advances in information technology, Thailand realises that knowledge is power, but that proper use and mastery of technology are also important. Office and factory automation and factory automation and communication equipment have revolutionalised the manner of doing business both locally and internationally-faxes, cellular phones, Internet, E-mail Intrancet, etc. The application and accessibility of modern information technology in Thailand will be more widespread and will be less costly as economies of scale are achieved. Investment by both public and private sectors in thailand in information technology both software and hardware will expand significantly as the county joins the information cyberspace mania pervailing in other parts of the world. It is expected that a comprehensive, clearcut policy on this subject will be formulated by the government soon. This trend will force SMIs to apply modern information technology to maintain their competitiveness and enhance their efficiency.
6. Research and Development (R & D)
Thailand's current investment in R&D on science and technology (S&T) is relatively low compared to the newly industrialising countries in Asia and developed countries. However, there is now a growing consciousness to increase R&D in S&T as a result of mass media exposure and the fruits of the dynamic efforts of various specialised government agencies. We will see dramatic increases in R&D investment by both public and private sectors to reach one per cent of GDP by the year 2005. Equally important is the successful commercialisation and protection of R&D results so that attractive returns on their investment can be achieved as an incentive for further investment. This would mean that S&T agencies of the government and the private sector will become increasingly more important and prominent. Comprehensive policies in stimulating investment in R&D are expected to be announced soon. This trend should benefit SMIs.
7. Environmental Consciousnes
As even now already pronounced, environmental consciousness by government and society will significantly increase to protect the country from the adverse effects of environmental degradation. More local and international pressure groups will make their presence felt in the way the ecological environment in Thailand should be managed insofar as renewable, non-renewable sources of energy, forest, marine and land resources, polluting and hazardous industries are concerned. Stricter measures on ecological conservation and stricter compliance of existing regulations would be imposed by the government, while more cooperation among government, private sector and non-governmental organisations would be expected. As part of their social responsibility and under external pressure, SMIs will be bound to invest in environmental protection measures, however, this should be seen as a necessary social overhead for the common good.
8. Internationalisation of Business Facilities
There will be a strong trend towards the establishment of strategic alliances by both government and private sector in different countries and towards international subcontracting to take advantage of each country's comparative advantage. Already visible are the agreements under the Asean Free Trade Agreement (AFTA), Asia-Pacific Economic Cooperation (APEC), the Asean Industrial Complementation Scheme (AICO), under the Indonesia-Malaysia-Thailand Growth Triangle (ITM-GT), Mekong River Project, and recently the partnership in economic cooperation between Thailand and Singapore in jointly developing an industrial park in the Eastern Seaboard of Thailand. These strategic moves would facilitate the movement of goods and services and their production within the agreeing countries. This trend highlights a dichotomy of countries competing in some aspects and complementing in other aspects so that the net result would be positive synergies for all. The implication for SMIs is that they have to enhance their competitiveness to reach out to international market niches and at the same time protect their domestic turfs through more efficient operations.
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