The Nation’S Competitiveness

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The Nation’S Competitiveness

  1. 1. S uvit M aesincee July 21, 2003 R & D and The Nation’s Competitiveness http :// www . nrct . net / symposium / media2 . php?type = wma&id = 3
  2. 2. Our Opportunity
  3. 3. 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 Singapore Resource Based Labor Intensive Scale Based Differentiated Science Based China South Korea Resource- Based/ Labor Intensive Economies Science- Based/ Differentiated/ Scale Intensive Economies
  4. 4. Percentage of exports in natural resources PPP per capital <ul><li>Bolivia </li></ul><ul><li>Russia </li></ul><ul><li>Canada </li></ul><ul><li>Costa Rica </li></ul><ul><li>Brazil </li></ul><ul><li>India </li></ul><ul><li>Singapore </li></ul><ul><li>Sweden </li></ul><ul><li>Japan </li></ul><ul><li>US </li></ul><ul><li>Malaysia </li></ul><ul><li>Korea </li></ul><ul><li>Germany </li></ul><ul><li>Argentina </li></ul>Relationship Between Natural Resource Exports and Wealth <ul><li>Thailand </li></ul>
  5. 5. The Silent War and Paradigm Lost Scale Driven Economy Tragedy of the Common Over Investment Shortage of Demand Industry Rationalization Over Capacity Hyper Competition Mass Market Competitive Paradigm Mass Customization Competitive Paradigm Creativity Driven Economy New Competitive Playing Field Paradigm Lost
  6. 6. Industry 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 Economy Source: Marketing Moves
  7. 7. Level of Customization Level of Sophistication High Tech Low Tech Low Touch High Touch Video Games Advertising Architecture Art Craft Design Fashion Film Music Performing Arts Publishing R&D Software Toys and Games TV and Radio The Emergence of Creative Economy
  8. 8. The Most Important Intellectual Property in the Creative Economy is the Stuff Inside People’s Head Technology Concept Value Source: Cagan and Vogel High Low High Low
  9. 9. More for Less Thai Testing and Support Coding Low-Level Design High-Level Design Requirement Analysis Conceptualization Ireland Israel India Example: Software Industry Value Created More for More Less for More Source: Software Park
  10. 10. 1948-1970 Self Sufficient 1970-1980 Export Agricultural Products Productivity Improvement 1980 up Export Know-How and Technologies Export Local Consumption Value 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
  11. 11. Can Thailand Compete in the New Competitive Landscape? World Economy Thai Economy Industry Based Economy Knowledge Based Economy ? <ul><li>Resource and Labor Intensive </li></ul><ul><li>International Division of Labor </li></ul><ul><li>Investment Driven </li></ul><ul><li>Mass Customization </li></ul><ul><li>Critical Mass </li></ul><ul><li>Knowledge Intensive </li></ul><ul><li>Economies of Skills </li></ul><ul><li>Economies of Speed </li></ul><ul><li>Mass Production </li></ul><ul><li>Standardization </li></ul><ul><li>Capital Intensive </li></ul><ul><li>Economies of Scale </li></ul><ul><li>Economies of Scope </li></ul>
  12. 12. Our Capability
  13. 13. 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
  14. 14. <ul><li>Our Investment for the Future Are Significantly Low </li></ul>International Comparison of R&D Investment Source: Thailand Economic Monitor, June 2000 0 2.0 1.0 1.5 0.5 2.5 3.5 3.0 USA Japan Korea Malaysia Taiwan Singapore Thailand
  15. 15. <ul><li>We Still Deal With a Wide Manpower Gap in Science and Technology </li></ul>Gaps in Science and Technology (At Current Level of Demand) Source: Lall (1999), Raising Competitiveness in Thai Economy, Country Employment Policy Review, ILO. M.Eng /D. Eng B. Engineering B. Science MS/DS 4,520 10,963 5,874 7,015 180 541 (113) (352) 1996 2001
  16. 16. ...So We Cast Doubt on Our Ability to Compete High Singapore Ireland Thailand Philippines Indonesia China France Germany UK India USA High Low Low <ul><li>Entrepreneurial Capabilities </li></ul><ul><ul><ul><li>Number </li></ul></ul></ul><ul><ul><ul><li>Quality </li></ul></ul></ul><ul><li>HR Capabilities </li></ul><ul><li>Number </li></ul><ul><li>Wages </li></ul><ul><li>Skills </li></ul>Source: Nasscom 1999 Software Industry
  17. 17. 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 9.17 3.16 1994 1999
  18. 18. 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 Africa 1980 1985 1990 2000 1995 2005 Incubator by Region/Country Source: Incubators
  19. 19. Telecommunications Productivity Our ICT TFP 31-57 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 Rate 76 Index of US (1999) =100; Thai data 1999 Source: =McKinsey + X X X
  20. 20. Thailand’s Current Technology Position Technology Achievement Index Leader Finland US Sweden Japan Korea Netherlands UK Canada Australia Singapore Germany Norway Ireland Belgium New Zealand Austria France Israel Potential Leader Spain Italy Czech Hungary Slovenia HK Slovakia Greece Bulgaria Poland Malaysia Croatia Mexico Cyprus Argentina Romania Costa Rica Chile Dynamic Adopter Uruguay South Africa Thailand Panama Brazil Philippines Bolivia China Columbia Peru Jamaica Iran Indonesia India Sri Lanka Algeria Egypt Maginalized Pakistan Senegal Nicaragua Ghana Kenya Sudan Tanzania
  21. 21. Our Strategy (Structural)
  22. 22. 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
  23. 23. Regional Global Neighborhood Local Local Links Global Reaches Social Cohesion International Competitiveness <ul><li>Efficiency </li></ul><ul><li>Cost effective </li></ul><ul><li>Productivity </li></ul><ul><li>Innovation </li></ul><ul><li>Sufficiency </li></ul><ul><li>Community Building </li></ul><ul><li>Cultural Identity </li></ul><ul><li>Family Value </li></ul>New Competitive Paradigm
  24. 24. <ul><li>Foods </li></ul><ul><li>Tourism </li></ul><ul><li>Fashion </li></ul><ul><li>Software </li></ul><ul><li>Auto industry </li></ul>Potential Global Niches New Competitive Landscape Level of Sophistication High Tech Low Tech Level of Customization Low Touch High Touch Cultural Strengths Craftsmanship Skills Peace of Mind Delicate Living Flavorful Sense
  25. 25. Value added Potentials Focus of Thai Producers Strategic Thrust Production Marketing R&D
  26. 26. 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 <ul><li>System thinking, results form </li></ul><ul><li>mental models </li></ul><ul><li>Integrative, interdisciplinary </li></ul><ul><li>approaches </li></ul><ul><li>Team oriented </li></ul><ul><li>Create wealth through innovation </li></ul><ul><li>and distribute to most productive </li></ul><ul><li>people </li></ul><ul><li>Law and regulatory framework as </li></ul><ul><li>enabling investment in innovation </li></ul><ul><li>Informal producers increasingly </li></ul><ul><li>integrated </li></ul>The Old Direction A New Direction Social Capital Human Relations <ul><li>Paternalistic </li></ul><ul><li>Hierarchical organizations </li></ul><ul><li>Individual oriented </li></ul><ul><li>Trust oriented </li></ul><ul><li>Interdependent </li></ul><ul><li>Meritocratic </li></ul><ul><li>Team oriented </li></ul>Human Capital <ul><li>Labors and managers are fungible </li></ul><ul><li>Viewed as input costs </li></ul><ul><li>General education </li></ul><ul><li>Source of competitive advantage </li></ul><ul><li>Source of increasing return on inv. </li></ul><ul><li>Education as specialized, focused </li></ul>Learning <ul><li>Linear learning, results form strategy </li></ul><ul><li>choices and organizational design </li></ul><ul><li>(single loop learning) </li></ul><ul><li>Reductionist strategies </li></ul><ul><li>Technical and compartmentalized </li></ul>Justice and Social Equity <ul><li>Redistribute finite wealth </li></ul><ul><li>Law and regulatory framework as constraints </li></ul><ul><li>Informal producers are marginalized </li></ul>New Direction of Investment in Human and Social Capital
  27. 27. Our Strategy (Behavioral)
  28. 28. Early Market Mainstream Market Innovator Early Adopter Early Majority Late Adopter Laggards 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 Enthusiastics Visionaries Pragmatics Conservatives Skeptics Profile Nature of Entrepreneurs
  29. 29. Innovator Early Adopter Early Majority Late Adopter Laggards Architecture and Capability Innovation Platform Innovation Product Innovation Process Innovation Different Stages of Innovation Development
  30. 30. Innovator Early Adopter Early Majority Late Adopter Laggards IRR Line Return Risk Mature Growth Introduction Business Angel Venture Capital Fixed Debt Different Types of Business Support
  31. 31. Psychological Issues Loss Gain <ul><li>Delay Gain </li></ul><ul><li>Delay Loss </li></ul><ul><ul><li>Unbundle gains </li></ul></ul><ul><ul><li>Bundle losses </li></ul></ul><ul><ul><li>Bundle smaller losses with larger gains </li></ul></ul><ul><ul><li>Unbundle smaller gains from larger losses </li></ul></ul>
  32. 32. Creating a New Competitive Platform
  33. 33. Clustering Development Knowledge Driven Platform Emerging Extending “ Lift-off” A Cluster Provides a Conducive Platform for the Creation, Diffusion, Adoption and Interaction of Innovation Creation Diffusion Interaction Innovation Cycle Strategic Transformation…Clustering Development... Adoption
  34. 34. Process Related Market Related Local Local National International National International Rural Enterprises Family Enterprises Traditional Subcontractors Source: Bianchi and Tommaso Strategic Transformation…Clustering Development... Most of Thai Industry Clusters Are Still in the Emerging Stage
  35. 35. Nature of Cluster Linkages in the Emerging Stage is Uneven and Unpredictable Strategic Transformation…Clustering Development... Nature of market/customer base Nature of technology R&D needs Nature of human resource needs Nature of capital financing needs Underdeveloped, narrow, often serving limited local demand Very specific and high-level; often still relate to spawning entity Narrow but high-level; often reliant on a few key people Patient capital required; limited sources often lead to owner financing Economic multiplier capacity Ability of attract outside investment Small; employment and economic impacts limited Low; may attract some state R&D or investment monies
  36. 36. Some Industries (e.g., Autos), However, Shift their Clusters from the Emerging Phase to the Extending Phase Strategic Transformation…Clustering Development... Enterprises in the Cluster Increasingly Diverse and Sophisticated; Multiple Coopetitive Relationships Emerging Nature of market/customer base Nature of technology R&D needs Nature of human resource needs Nature of capital financing needs Expanding , diversifying within region, and developing links outside region Some continuing high-level, but increasing technology applications activity and basis “off-the-shelf” equipment needs for suppliers Some high-level professional, but increasingly mid-level technical and marketing needs as well; reliant on an increasingly diverse workforce More complex and diverse; venture capital and expansion capital are particularly important and may become more accessible and cluster increasingly proves its viability Economic multiplier capacity Ability of attract outside investment Growing; core firms now have impact on local suppliers and consumer services, etc Emerging; cluster capabilities and synergies may begin to attract similar firms and suppliers and government/private investment
  37. 37. SME Networks Are Loosely-linked Groups of Small Firms with Some Specific Purposes Process Related Market Related Local Local National International National International Rural Enterprises Family Enterprises Traditional Subcontractors SME Networks Source: Bianchi and Tommaso People’s Republic of China SMEs E.g., improving technological efficiency and pooling resources for export promotion, thereby accessing international markets Strategic Transformation…Clustering Development...
  38. 38. Opportunity for Our Cultural Industry Cluster Development Tourism Creative Industries Graphic Product/ Packaging Design Advertising Music Video Web Design Radio/TV Production Fashions Foods Magazine/Book Publishing Strategic Transformation…Clustering Development...
  39. 39. Medium Sized Niche Enterprises Exists in Certain Fashion, Luxury Items of Handicraft Production and High Tech Products Process Related Market Related Local Local National International National International Rural Enterprises Family Enterprises Traditional Subcontractors Medium Sized Niche Enterprises SME Networks Source: Bianchi and Tommaso Singapore SMEs --Making sound cards used in multimedia computing --In the mid 1990s, together accounted for three-quarters of the world market Strategic Transformation…Clustering Development...
  40. 40. The Ultimate Goal Is to Develop “Lift-off” Industry Clusters Strategic Transformation…Clustering Development... There are extensive and multiple synergies within cluster; major linkages develop with other regional clusters and/or outside agglomerations Both broad and niche markets; state, regional, national, even international customer; some mature markets Needs at all levels, from technology discovery to commercialization and application to off-the-shelf equipment development, reflecting the spectrum of cluster firms Very broad and high skill demands; occupations of many kinds required; institutions are responding Full range of financing needs represented in cluster; good access to regional and national sources because of cluster reputation Nature of market/customer base Nature of technology R&D needs Nature of human resource needs Nature of capital financing needs Extensive; cluster becomes virtually self-reliant, attracting wealth and during it over locally rather than exploring it Excellent; reputation spreads; major national players tend to feel they have a stake in the regional cluster, so relocations/expansions increase Economic multiplier capacity Ability of attract outside investment
  41. 41. From Traditional to Global Subcontractors Process Related Market Related Local Local National International National International Rural Enterprises Family Enterprises Traditional Subcontractors Medium Sized Niche Enterprises SME Networks Global Subcontractors Source: Bianchi and Tommaso Japanese SMEs --Moving from their pre-existing domestic subcontractors to global subcontractors Strategic Transformation…Clustering Development...
  42. 42. Industry Districts Comprise Geographical and Sectoral Concentration of SMEs... Process Related Market Related Local Local National International National International Rural Enterprises Family Enterprises Traditional Subcontractors Industrial Districts Medium Sized Niche Enterprises SME Networks Global Subcontractors Source: Bianchi and Tommaso Strategic Transformation…Clustering Development... ...Undertaking of Joint Action Aimed at Raising Collective Innovation and Efficiency
  43. 43. Source :Marketing of the Nations <ul><li>Population 4 millions </li></ul><ul><li>90,000 SMEs covering 4 0% </li></ul><ul><li>of employment </li></ul><ul><li>Stand alone and subcontractors </li></ul><ul><li>SMEs </li></ul><ul><li>Supporting infrastructure: </li></ul><ul><li>transports, research center, </li></ul><ul><li>financial institutes, university, </li></ul><ul><li>laboratories </li></ul><ul><li>Gain advantages of economies of </li></ul><ul><li>specialization </li></ul><ul><li>Export-oriented and has capacity </li></ul><ul><li>to respond to market changes </li></ul><ul><li>and compete globally </li></ul>Key Features Emilia-Romagna Emilia-Romagna In the Nortern Italy Is a Good Example Strategic Transformation…Clustering Development...
  44. 44. Connectivity Interactivity Key Success Factors For Clustering Formation Strategic Transformation…Clustering Development... Creativity Liquidity Clustering Formation Physical Capital Human Capital Social Capital Financial Capital Co-Prosperity
  45. 45. Dynamics of Industry Clustering Strategic Transformation…Clustering Development... Printing Printing Information Services Information Services Financial Services Financial Services Business Services Business Services Advanced Information System Food Food Agriculture Agriculture Textiles Textiles Apparel Apparel Chemicals Chemicals Basic Metals Basic Metals Electrical Machinery Electrical Machinery Industrial Machinery Industrial Machinery Metal Products Metal Products Trade, Wholesale Distribution Banking Banking Chemicals Chemicals Food Food Pharmaceuticals Pharmaceuticals Health Services Health Services Medical Equipment Medical Equipment Biomedical High-Fashion Apparel High-Fashion Apparel Chemicals Chemicals Basic Metals Basic Metals Plastic Plastic Textiles Textiles Advanced Materials Consumer Electronics Consumer Electronics Computers Computers Industrial Machinery Industrial Machinery Communications Equipment Communications Equipment Transportation Equipment Transportation Equipment Advanced Manufacturing Pharmaceuticals Pharmaceuticals Medical Services Medical Services Food Food Financial Services Financial Services Printing Printing Information Services Information Services Business Services Business Services Consumer Electronics Consumer Electronics Industrial Machinery Industrial Machinery Communications Equipment Communications Equipment Bicycles Bicycles Chemicals Chemicals Metals Metals Plastics Plastics Textiles Textiles High-Fashion Apparel High-Fashion Apparel
  46. 46. The New R&D Personal Agenda Organizational Agenda National Agenda Governing Directing Managing Executing

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