A summary of the findings can be seen below in Table 6.4 and Table 6.5.
Table 6.4 Summary of Findings: Government Officers
Questions Government officers
Executive of the Thailand Automotive Institute (TAI) -Regulation- Executive of the Excise Department -Taxation- Automobile Industrial Specialist Office of Industrial Economics -Incentives-
1. What are the responsibilities of your organisation?
- To conduct research on suitable policy. - To prepare master plans for the
automobile industry.
- To collect excise tax for the
government including automobile tax. - To guide the automotive industry. - To define policy. - To collect and conduct research.
- To prepare data for the Automotive Development Committee.
2. What are the key government policies which have enhanced technology transfer in the automotive industry? - Local content regulation - Amount of local content according to List A and List B. - Total allowed for each series.
- Automobile taxation.
- The difference in tax rates for each category of automobile.
- Incentive packages to attract foreign auto makers.
- Introduction of Export Promotion Zone (EPZ). - Establishment of Free Trade Area (FTA). 3. Have “Local
Content Policies” been successful in enhancing technology transfer?
- Yes, the automobile parts companies had to relocate to Thailand. - They had to use Thai partners and workers. - Thai companies gained significant knowledge on manufacturing processes. 4. What was the effect
of the abolishment of “Local Content Policies” in 1999? - In 1997, Thailand had an economic crisis. - The automobile industry status was considered to be at its lowest point.
- The abolishment of “Local Content Policies” did not have any further effect.
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Table 6.4 Summary of Findings: Government Officers (continued)
Questions Government officers
Executives of the Thailand Automotive Institute (TAI) -Regulation- Executive of the Excise Department -Taxation- Automobile Industrial Specialist Office of Industrial Economics -Incentives-
5. What is the status of Thai automotive industry technological capabilities? - Our manufacturing capability is exceptional. However, research and design is not at the same level. - We are involved in product development to decrease product defects.
- The next step will involve innovation.
- Technology and new management strategy transfer to Thai companies through joint ventures. - We have high-
technology machines and development programmes for product improvement and production quality. - We have become the manufacturing base for one-ton pick-ups. - We have a fully functioning research and design department for one-ton pick-ups. 6. What are the
strengths and
weaknesses of the Thai automobile industry when compared with China, Korea, and Malaysia? - Success with manufacturing and R&D skill. China - Difficult to compete in the mass market; even more so than Japan.
- Lower quality of labour than Thailand .
Malaysia
- Have a national car company.
- Thailand is better at manufacturing but not R&D.
- Globalisation takes small companies into the
market. Korea
- Some companies survive.
7. What is the direction of government policy for the next
10 years?
- Detroit of Asia. - Target to produce two million cars a year in 2010 was met.
- No national car programme, only “international cars”.
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Table 6.5 Summary of Findings: Automobile Companies
Questions Automobile Company
Mr. Sompong Phaoenchoke Managing Director of
Thairung Union Car - Thai Company -
Mr. Phaibool Poocharoen Board of directors of Isuzu
Company - Japanese Company-
1. What are the key government policies that enhance technology transfer in Thailand?
- The local content restriction policy helped in transferring technology in the past.
- The scale of demand was low and it was not suitable for mass technology.
- The limited model policy also supported economies of scale.
- The government has done nothing to support us.
- Addressed policy but did not truly support the industry.
- Very difficult to bring the issues into cabinet meetings.
- No actual plans or real regulations.
- The BOI should encourage foreign companies to transfer more technology.
2. What is the average percentage of the local content in your car?
- More than 90% of our content is from local vendors.
- We also have our own auto part plants.
- We started by importing chassis and design, and sourcing the components.
- For pick-up trucks about 80% - Pick-up truck models produced in Thailand are divided into two kinds: export trucks and domestic trucks.
- Different kinds of engine and parts.
- We can produce almost all parts. - We cannot produce the ECU and electronic panel and some small parts requiring high technology. 3. Do you have your own
research and design department?
- We have our own research and design department.
- We started as an auto parts company.
- We produced many parts included auto body, knuckle, and rear panel.
- In 1970, we started to produce our own minor changes to pick- ups and vans.
- We hire professional companies to work on R&D but we cannot yet reach the level of being able to produce a whole car.
- R&D can lead to major changes. - Lack of a “Testing Course” has caused major problems in R&D. - Toyota plans to build testing courses in Thailand after they have moved their manufacturing base here.
131 Table 6.5 Summary of Findings: Automobile Companies (continued)
Questions Automobile Company
Mr. Sompong Phaoenchoke Managing Director of Thairung
Union Car - Thai Company -
Mr. Phaibool Poocharoen Board of directors of Isuzu
Company - Japanese Company- 4. What technology has
been transferred and what has not?
Transfer
- About 70-80% of
components from pick-ups have been transferred.
- Some parts can be reproduced. - Some components cannot be produced.
- R&D for pick-ups is starting to transfer to Thailand.
Not transferred
- Research and design of sedan cars.
- We can utilise the technology but cannot invent any new technologies.
- Sophisticated in particular parts such as ECU, EFE systems, and airbag sensors.
Transfer
- Assembling and manufacturing technology.
- Technicians from Japan are brought in to fix problems in production processes. - On-the-job training. Not transferred
- Research and design for the whole car.
- Changing designs. - Changing raw materials.
5. What are the strengths and weaknesses compared to Korea, China, and Malaysia?
Malaysia
- Our regulations are more open for foreign companies.
Korea
- Our role model R&D is over two decades ahead of the Thai car manufacturers technology. China
- Massive domestic market. - Domestic market is not dominated by international companies.
Malaysia
- Different approach to Thailand. Korea
- More advanced than Thailand in terms of research and design. China
- Massive domestic market. - The government supports research and design.
- Complete package to develop the automobile industry.
6. Do you have any recommendations for government policies in the near future?
- Solve the problem of cost by tax changes.
- Companies should be allowed to deduct tax for research and design expenses.
- Tax policy must enhance niche products.
- The BOI should support R&D programmes more by convincing foreign companies to take prototype car testing to Thailand. - Tax deduction for research and design expenses.
- Do not change excise tax rates for five years.
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6.5 Conclusion
The Phase I study aims to answer the first research question: “What government policies were used to develop technological capability in the Thai automotive industry from 1960- 2009?” The two research approaches that are employed are documentary research and in- depth elite interview as follows.
The documentary research (the full version of which is presented in Chapter 2) explains the six phases of government policy from 1960 to 2009 that affected technological capability development in the Thai automotive industry. Government policies for the auto-part industry have moved from high to low local protection with a greater focus on export-orientated strategies.
In the in-depth elite interviews, five interviewees from the government and private sectors were recruited. In the Thai automotive industry, government policies used to develop technological capabilities can be divided into three types; regulations, taxes, and incentives. Most of the interviewees agreed that all three policy types have important roles in supporting the activities and developing the technological capabilities of the organisation. FDI investment has motivated MNEs to set up assembling plants in Thailand. However, to comply with LCR regulations, MNEs are forced to procure local car components. CBU and CKD regulations involve different tax rates for importing different types of vehicles and auto parts. MNEs can pay lower taxes when they mostly use local parts and import few parts, such as control units. According to the experts’ opinions, LCR, CBU, and CKD once had a big impact on technology development but this is no longer the case. Other policies have now become more impactful on R&D activities.
Excise tax has an impact on technological capability development, and its rate is satisfactory for manufacturing companies. Essentially, R&D tax deduction is a recent regulation. These experts agree that the government should support all kinds of R&D activities for local suppliers. Launching R&D requires the hiring of foreign experts to assist and invest in modern technologies. R&D tax deduction will support them in inventing new products. Interestingly, setting up joint-venture companies with foreign business partners can provide a short-cut for technology development. Thailand’s auto-part industry is at the midpoint of
133 R&D development, and more effort needs to be put in if it’s to reach its goal of becoming the “Detroit of Asia.”
The Phase I findings are implemented in other chapters. In Chapter 4, the Phase I findings (the effect of government policies) fill the gap in the literature review and form part of the conceptual framework. In addition, in Chapter 5, the Phase I findings are used for creating a questionnaire for the government policies section in Phase II.
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