TECHNOLOGY UPGRADING IN THAILAND: A STRATEGIC PERSPECTIVE* by Chatri Sripaipan Recent Development of the Thai Economy and Its Policies

The Thai Economy and Its Structure Thailand has experienced spectacular economic growth over the past few years. From 1987 to 1990, the growth rate of GDP averaged 11.2 percent in real terms, making Thailand one of the fastest growing economies in the world. Despite the Gulf War, a military coup, and the economic slow-down in major industrialized countries, the growth rate for 1991 is estimated at 8.0 percent. The National Economic and Social Development Board (NESDB) expects the economy to grow at an average rate of 8.2 percent throughout its Seventh Plan (1992-96). However, a double-digit growth rate for a few years is not as significant as the fact that the economy of Thailand has been expanding at an average rate of 7 percent per annum throughout the past three decades. Such development has caused two important structural changes in the productive sectors. The first occurred in 1979, when the output of the manufacturing sector exceeded that of the agricultural sector for the first time. The manufacturing sector had 22.1 percent of GDP, followed by the agricultural sector and the trade sector at 21.2 and 16.4 percent, respectively. The second change was in 1988, when the agricultural sector was overtaken by the trade sector. The GDP percentages of the manufacturing, trade, and agricultural sectors were 23.3, 17.1, and 16.9 respectively. This was because the industrial sector had been expanding at a rapid average rate of 9.2 percent during the period from 1970 to 1989, while the agricultural sector grew at an average rate of only 3.9 percent during the same period. Consequently, Thailand is becoming industrialized despite the fact that the majority of the work force (over 60 percent) is still in the agricultural sector. Within the manufacturing sector, the shift of the production structure from resource-intensive to labor-intensive industries has been significant. Between 1970 and 1987, the marked decrease in the share of resource-intensive industries, from 54.3 percent to 39.7 percent, was offset by an increase in labor-intensive industries, from 23.3 to 38.7 percent, while there has been little change in the shares of scaleintensive, differentiated, or science based industries. As for exports, their structure __________________ *REPRINTED FROM: Denis Fred Simon (ed.), The Emerging Technological Trajectory of the Pacific Rim (Sharpe: Armonk, N.Y., 1995), Chapter 7, pp. 147-170. over the same period has undergone a more profound change. There has been a large fall in the share of resource-intensive industries, from 86.8 percent in 1970 to 37.4 percent in 1987, while all four others made substantial increases. In particular,
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labor-intensive industries increased from 10.7 to 39.0 percent. Compared with the production structure, this shows that the shares of resource-intensive, labor intensive, and science-based industries are similar to those in production. However, the share of differentiated goods exports is more than twice as large. This suggests that Thailand is beginning to develop some comparative advantage in this area. nevertheless, differentiated goods exports were a mere 12.9 percent. The bulk of exports (over 75 percent) belonged to the resource-intensive and labor-intensive industries. Table 1 illustrates the points made in the previous paragraph while showing more recent trends. Although the majority of industries are still resource-intensive, labor-intensive industries, which have been rapidly developed over the past decade, took over the top two places as well as the seventh. The differentiated goods integrated circuits and the science-based industriescomputer and peripherals---are not doing too badly, but both belong largely to multinational subsidiaries, which shifted the more labor-intensive portions of their operation into Thailand primarily to seek a lower-cost manufacturing base. __________________________________________________________________ __ Table 1 The Top Ten Export Items of Thailand (in million baht) 1989 1990 Value Value Item Rank Rank Garments 57,892.4 (1) 65,804.2 Gems and jewelry 28,421.9 (3) 34,891.8 Computers and peripherals 26,835.1 (4) 38,694.5 Rice 45,462.3 (2) 27,769.4 Tapioca 25,052.3 (6) 24,465.2 Integrated circuits 18,426.2 (8) 21,580.5 Foot wear and pants 13,524.4 (10) 20,219.5 Rubber 26,431.7 (5) 23,557.3 Canned sea food 19,767.9 (7) 21,623.4 Frozen shrimp 16,058.6 (9) 20,453.7 1991 Value Rank 76,000 (1) 42,000 (2) 40,000 (3) 27,000 (4) 27,000 (4) 27,000 (4) 25,000 (7) 24,600 (8) 23,600 (9) 22,000 (10)

(1) (3) (2) (4) (5) (8) (10) (6) (7) (9)

Source: Ministry of Commerce, Export target in 1991 (as of June 1991).

Recent Changes in Policies The Thai governments monetary policy of international liberalization was initiated toward the end of the Prem government (1980-88). This policy picked up
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its pace in the Chatchai government (August 1988-February 1991), and in spite of the military coup on February 23, 1991, it continues and has even accelerated under the interim government. Under the Anand administration, liberalization and laissez-faire have become the fundamental philosophy propelling tax reform and the dismantling of government regulatory controls. Some developments are listed below. Monetary Policy After complying with Article 8 of the International Monetary Fund in May 1990, the second phase, liberalization of foreign exchange, came into effect in April 1991, as planned. The Bank of Thailand is considering the right timing to announce the third phase of liberalization, in which foreign exchange controls will be abolished entirely. Tariff Policy Thailand has made an offer GATT to reduce import duties on 1,700 additional items. As of October 1990, the tariff rate for production machinery was reduced from 20-40 percent to 5 percent. In July 1991, import duties on completely built-up (CBU) cars and completely knocked-down (CKD) parts were sharply reduced, resulting in reduced protection for the domestic car industry. At about the same time, computer taxes were also sharply reduced to promote the usage of computers in businesses and industries. In this effort, less attention was paid to the infant domestic computer industry, which would certainly be affected. The Ministry of Finance has a plan to reduce the ceiling tariff rate from 60 to 30 percent, to decrease the number of tariff rates to only six, and to correct tariff anomalies between finished goods, intermediate products, and raw materials. Tax Policy Perhaps the development that has had the most far-reaching effect is the value added tax (VAT) which is currently in the process of being enacted into law. When implemented, it should bring in a broader tax base and eliminate the present problem of cascading business taxes, at each stage of transaction between different companies, which has long been plaguing the development of subcontracting industries. Other important tax and related changes that have been or are in the process of being implemented by the Ministry of Finance are a leasing tax, corporate merger tax, bad debt reserve, depreciation rules, gold bullion importing, corporate income tax, savings interest tax, and holding company dividend tax.

Energy Pricing Policy The gasoline price has been floated. The electricity rate will follow suit soon. Industry Policy
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The Ministry of Industry has lifted bans and restrictions on the establishment and expansion of twenty-one types of industries, including rice milling, machinery adaptation for mining, ice making, matches, electric cable, asphalt, polyester policol, alum, large plastic bags, sulphuric acid, steel reinforced concrete, plastic mats, cotton spinning, the export of radiated minerals, textiles and garments, tapioca products, bottles, ethyl alcohol, fishing nets, soda ash, and cement. The power to license factories has been delegated to provincial authorities. At the same time, the ministry has stepped up its efforts to control industrial pollution. It has taken action against 301 factories out of the 717 complaints it had received on environment.

Status of Science and Technology in Thailand

A Brief Historical Account The importance of scientific research has been recognized since the announcement of the Constitution of the Royal Thai Kingdom B.E 2492 (1949), which states in Article 65 that The government should support research in the fields of liberal arts and sciences. Later in 1956, the government passed the National Research Council Act, with the view that the progress of the country had to be based on scientific research to sustain long-term development. The establishment of the National Research Council can be seen as the starting point to encourage research and development (R&D) to systematically increase the scientific and technological capability of the country. In 1963, the National Applied Science Research Institute was established to take charge of implementing research in applied sciences to promote and utilize natural resources to develop industry and the country. In 1979, the Ministry of Science, Technology and Energy (MOSTE) was established with the aim of playing the central role for setting national policy and for planning in science, technology, and energy. A number of organizations concerning science and technology were brought under its wing from the Ministry of Industry and the Office of the Prime Minister. They are the Department of Science Services, the National Research Council of Thailand, the Office of the National Environmental Board, the Office of Atomic Energy for Peace, the National Energy Administration, and the Thailand Institute of Scientific and Technological Research (TISTR) (previously called the National Applied Science Research Institute). However, a number of science and technology (S&T) activities remain with other ministries. Research in agriculture is mainly conducted in the Ministry of Agriculture and Cooperatives, which consumes over 40 percent of the government research budget. The Ministries of Education and University Affairs are two large R&D performers which sent about another half of the countrys R&D budget. Furthermore, the Ministry of Industry is responsible for industrial standards and has been providing technical assistance to small and medium-sized industries. After the establishment of MOSTE, the next Five-Year National Economic and Social Development Plan, the Fifth Plan (1982-86), was the first five-year development plan in which science and technology issues were explicitly addressed in a separate chapter. The two issues addressed in the plan were: first, the use of science and technology to increase production efficiency was still rather limited; and
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second, modification or improvement of imported technology and technological development was slow. The proposed measures were: 1. To promote the survey of basic data essential to technological development. 2. To promote appropriate foreign technology transfer. 3. To increase the countrys scientific and technological research and development capability. 4. To mobilize manpower for scientific and technological development. The achievement in that period was rather limited. More visible results were a number of signed agreements for science and technology cooperation with foreign countries. The most significant of these was the Science and Technology for Development Project, with a total fund of US$49 million over a period of seven years with assistance from the United States. Another achievement is the establishment of the National Center for Genetic Engineering and Biotechnology (NCGEB) at MOSTE as a funding agency for a network of research laboratories in universities and TISTR in the same discipline. The Sixth Plan (1987-91), also contained a chapter on the Science and Technology Development Plan. It recognized the significance of developing S&T capability and identified two key issues: that cooperation between S&T units of all government agencies and the private sector was the key to success, and that effective linkage between developers and users of S&T was needed to have an impact on the problems and the needs of the private sector. The S&T Development Plan has four main implementation plans: 1. S&T management system and infrastructure development; 2. increase in efficiency of S&T activities; 3. S&T manpower development; and 4. increase in efficiency of production. Under this plan, the Office of Science and Technology Development Board (STDB) was established to operate the Science and Technology for Development Project. MOSTE also established two more national centers: the National Center for Metals and Materials Technology (NCMMT) and the National Electronics and Computer Technology Center(NECTEC). This makes a total of three national centers at MOSTE, corresponding to the three areas of emphasis by STDB, namely: biotechnology, materials, and electronics. These three priority areas have been targeted by MOSTE since the beginning of the Sixth Plan.

One of the most important milestones in promoting science and technology is the Law for Development of Science and Technology. This law establishes STDB as a juristic entity to administer a Science and Technology Development Fund to be obtained from the government and other sources, including international agencies. The law also establishes the three national centers as specialized research institutes with the role of carrying out research and development, both inhouse and under contract from industries.

Research and Development

R&D Expenditure Both the Fifth and the Sixth National Economic and Social Development Plans set a target R&D budget of 0.5 percent of GNP, or roughly about 2 percent of the government budget. However, as shown in Table 2, the actual R&D expenditure between 1983 and 1987 averaged only 2,272 million baht a year, or 0.22 percent of GNP. The R&D expenditure figure of 1987 was the first to be derived from actual surveys, whereas those of previous years were budget allocations. In any case, it is very low. It is much lower than the R&D expenditures of developed countries, which range between 2.5 percent and 3 percent of GNP, and than those of newly industrialized countries, which range between 1.0 percent and 2.0 percent of GNP. Other distinct features from Table 3 are that R&D expenditures of state enterprises and private firms were both very low: only 277.24 and 181.56 million baht or 10.41 and 6.81 percent respectively. To make matters worse, the state enterprise category included TISTR, which is the only major research institute in the country, with an annual budget of about 200 million baht. Therefore, the R&D expenditures of all other state enterprises were actually very low indeed. __________________________________________________________________ _ Table 2 R&D Expenditudes (in million baht) 1983 1984 1985 1986 1987 R&D expenditures CNP % of GNP 1,411 903,353 0.16 2,824 961,961 0.29 2,452 996,802 0.24 2,010 2,664.5 1,072,242 1,211,431 0.18 0.22

Source: NESDB, National Research Council of Thailand. Table 3 National R&D Expenditure in 1987 (in million baht)

R&D Funding For individual researchers, there are a number of research funding sources. A university lecturer may start to apply for research grants from his or her own university on the order of tens of thousands of baht per project. For bigger projects, that lecturer should seek outside funding. The National Research Council of Thailand (NRCT) is a possible source, but the amount of each grant is very limited and the coverage is very wide. In 1990, NRCT funded 120 projects with a budget of 21.75 million baht. The three national centers can accommodate research projects of about one million baht, while STDB sets a limit of 6 million baht per project. Apart from domestic sources, there are a number of foreign funds. Table 4 shows that foreign sources accounted for 14.55 percent of R&D funding or 387.60 million baht n 1987. Research funding in the three priority areas of biotechnology, materials and electronics are shown in Tables 5, 6, and 7 respectively. It is quite clear that the area of biotechnology, by virtue of the strength of researchers and the interest of foreign funding sources, has been able to attract a much larger level of support compared with the other two areas. The total research fund in the past five years for biotechnology was 709 million baht, compared with 272 million baht and 187 million baht, respectively, for materials and electronics. R&D Outputs Research and development outputs are usually in the form of research reports and articles published in journals or presented at academic conferences. The research community of Thailand has been able publish about 300 articles a year in international journals covered by the Science Citation Index (see Table 8). Of these, health science contributed about 130 articles a year, followed by biological science
Table 4

__________________________________________________________________ __
Table 5

Funding of Biotechnology Projects from Five Sources Total Areas of Biotechnology

STDB NCGEB ATT CDR PSTC (No. of

1987-91

1984-90 50 22 7 14 7 9 7 2 12 80 10,892

1985-90 1985-90 1984-90 projects) 34 16 16 2 2 2 38 200.59 8 26 4 18 1 2 3 3 3 6 20 4 1 1 1 19 48 37.53 163.61 158 78 39 27 17 39 17 3 15 232 709.28

1. Agriculture 40 plant 18 animal 13 food 5 fertilizer 4 2. Public health 4 3. Environment 3 4. Energy 5. Others Total (No. of Projects) 47 Budget (million baht) 198,634 Key:

STDB = Science and Technology Development Board; NCGEB = National Center for Genetic Engineering and Biotechnology; ATT = Agricultural Technology Transfer Project, U.S.A.; CDR = U.S. - Israel Cooperative Research Development Program, U.S.A.; PSTC = Program in Science and Technology Cooperation, U.S.A.; Source: Proceedings of the 1991 Annual Conference on Thai Science and Technology in the Year 2000, Office of the Science and Technology Development Board, September 1991.

and physical science at about fifty articles each. The other three areas of natural resources and environmental science, agriculture, and engineering and technology produced about twenty to forty articles each. Although the number of articles published internationally by field may roughly reflect the fields scientific strength, it should also be noted that about one-third of these articles were contributed by foreign scientists in joint research efforts. This could be interpreted as suggestive that foreign interest and funding would also affect the number of published articles in a particular field. Furthermore, the number of research articles published in international journals does not represent the research strength of the whole country due to the small number of researchers involved. A more comprehensive evaluation should include other local journals and conferences. In developed countries, the number of patents registered can be used as a measure of technological capability in a particular field. However, in a developing country like Thailand with very few commercializable research results, this number is meaningless as an indicator. Since the enactment of the Patent Act in 1979, 1,827 patents were issued up to June 1990. Out of these issued patents, 1,304 were of industrial designs, some of which were of rather simple nature. Up to August 1990, 526 patents on engineering and chemical inventions were issued: 456 belonged to foreign nationals, 63 belonged to Thais, and 7 were not specified (see Table 9). Therefore, it is clear that the Thai patent system is being used by foreigners more than by Thai nationals. An effort to track down the 63 inventors resulted in 13 respondents, of which 4 had commercialized their inventions. Most of the inventors worked on their own and relied on their own income for funding, and few of the inventions required a large amount of money for investment.

It should be noted that some of the research funded by STDB and the three national centers has so far been commercialized. We can certainly expect more to come in the next five years. it should be very interesting to evaluate the impact (both direct and indirect) of these research projects on Thailands technological capability. R&D in the Private Sector
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Research in the private sector is much less than that of the public sector. All the companies in Thailand spent only 181.6 million baht (US$7 million) or 6.8 percent of total R&D expenditure in 1987. A previous survey suggested that Thai companies only invest 0.1 percent of their sales on R&D which is well below the Asian NIEs. This low level of expenditure explains the reported weakness of innovative capacity in Thai companies. A major study revealed that Thai industries were quite good in operating technology as well as adapting technology, but were remarkably incapable of innovating and creating new technology. [My 1990] study of the R&D of the private sector found that the majority of Thai companies concentrate on operating or utilizing existing technology. This does not mean that they run outdated or primitive operations. Actually, some have acquired state-of-the-art technology and operate ultramodern plants. Some are quite large. Some are subsidiaries of world-class multinationals. They have not, however, felt the need to undertake development work locally. A smaller group of companies have undertaken their own adaptation and development of existing technology, usually driven to do so by the nature of the local operating environment or by market needs. For example, in adapting to the local operating environment, a foreign joint venture in aquaculture modified Taiwan hatcher equipment and aimed to produce least-cost feed formulations using locally available raw materials. Other companies were led to technology development by market needs. Two consumer goods multinationals have continuing programs to modify products such as soap, detergents, and foods to suit local customs and habits. Predictably, cases of R&D to create new technology are extremely rare and are affordable only to a few large companies. Recent results from such companies research are, for example, the production of special high-grade refractories and the formulation of shrimp feed, which has a better growth efficiency ratio than equivalent products manufactured in Taiwan and Indonesia. Private companies are not conducting more R&D because of the constraints of economic and policy factors and S&T infrastructure, including the following factors: 1. Due to high-growth economy, firms are rapidly scaling up production capacity to meet excess demand. Therefore, they do not feel the pressure for innovation or differentiation of products. 2. Government policies limit the number of companies entering individual sectors and therefore lessen the competitive pressure needed to stimulate R&D activity. 3. Import taxes on R&D equipment and precision instruments remain high, limiting the ability of small and medium-sized companies to acquire them. 4. Taxes on royalties and license fees for foreign technology further increase its cost.
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5. There is a need for improved availability of technical consultancy services and information of S&T activities in the public sector. 6. There is a clear shortage of technical manpower to satisfy present levels of demand for production engineers and technicians necessary for operating and absorbing the imported technology. Although there is no obvious shortage of manpower for technology development or generation, this is more due to underactivity in R&D on the part of Thai companies than to an oversupply of R&D personnel. 7. Existing companies finance technology acquisition using internal resources or raise loans from commercial banks as part of an overall business development plan. Some financial assistance to small and medium-sized companies does exist, but its impact has yet to be felt. Assistance to the Private Sector The Board of Investment (BOI) is providing incentives to R&D projects by exempting import taxes on machinery and corporate tax irrespective of the location of the project. So far there are fifteen projects approved with a total investment of 996 million baht. There are currently three sources of soft loans at low interest for private sector R&D activities: MOSTE, STDB, and the Bank of Thailand (BOT). In addition, STDB also operates a grant fund that requires a matching allocation from the granted company. The performance of these funds is summarized in Table 10. It should be noted that MOSTEs loan fund has the longest historythree yearsand has been the most heavily utilized, with ten projects approved totaling 75.3 million baht. STDBs activities have improved markedly since March 1990, from only two loan projects to seven loan projects and four grant projects. The Bank of Thailands fund is least utilized since it is restricted to R&D projects promoted by BOI. S&T Manpower It was estimated that in 1990 there were 36,700 scientists, 49,934 engineers, and 33,847 agriculturists with a bachelors degree or higher level of education. Below the bachelors degree there were 1,494, 706,317, and 115,256 persons with science, engineering and agriculture education respectively. This makes a total of 120,481 persons or 12.8 percent with a bachelors degree or higher qualification, and 823,067 persons or 87.2 percent with less than a bachelors degree. Thus, the total number of S&T personnel is 943,548 persons, which is 2.9 percent of the countrys labor force; Thailand has 15 scientists and engineers per 10,000 population. This is very low compared with say, Korea, which has 122 scientists and engineers per 10,000 population.
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In the past few years, because of the economic boom, Thailand has been experiencing a severe S&T manpower shortage due to excess demand. In 1990, 1250 scientists and 2,531 engineers were graduated but the demand forecasts for scientists and engineers in 1992 estimated a need for 2,532 and 5,136 persons, respectively. Despite the recent effort of the Ministry of University Affairs to accelerate the production of engineers in fields of severe shortagethat is, mechanical electrical, industrial and chemical engineers the shortage is expected to persist throughout the Seventh Plan (1992-96). This shortage has already resulted in an alarming rate of brain drain from the public sector to the private sector for a much higher salary. In the private sector, there are complaints about the difficulty of recruitment, high salary demand, and high turnover rate. R&D manpower in 1987 is shown in Table 11, which indicates that Thailand has a total of 8,493 researchers and a full-time equivalent (FTE) of 5,539 persons. The university has the higher number of researchers, 4,898, but the FTE is lowered considerably to 2,518, which is only slightly higher than FTE of government, 2,416.75. State enterprises, private firms, and non-profit private organizations have far fewer researchers: 527, 145, and 21, respectively. As for the number of researchers in each academic discipline, Table 12 shows that medical science has the highest number, 8,261. Ninety percent of them are physicians, who are classified as having masters degrees. Social science and humanities come second at 2,229, and engineering is last at 1,176. To make an international comparison, the number of research scientists and engineers (RSE) in Thailand totals 2,846 persons or 1 person per 10,000 workers. This is much lower than those of other countries; for example, there are 32 RSE per 10,000 workers in Taiwan, 44 in Sweden, and 79 in Japan.

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Scientific and Technological Services Scientific and technological services are support services enabling the smooth and efficient operation of S&T activities. They encompass metrology (industrial standards), calibration services, testing service, information service, technical consultancy service, and other supportive infrastructural services. The Ministry of Commerce is empowered by the Weight and Measurements Act 1923 to maintain primary standards; i.e., the licensing and certifying authority for weighing machines and linear and volumetric measuring instruments. In 1985, the cabinet assigned the Department of Scientific Services to maintain mechanical primary standards and the Thailand Institute of Scientific and Technological Research (TISTR) to maintain electrical primary standards. The Thai Industrial Standards Institute is responsible for the preparation and publication of Thai industrial documentation standards. Most of Thai calibration services are operated by the public sector except the Technological Promotion Association (Thai-Japan), which is a private organization. Product testing services are carried out by about thirty authorized laboratories in the public sector. To take care of the everincreasing work load, about seven testing laboratories in the private sector have been certified. Apart from major libraries in universities, a number of organizations provide specialized information services. For example, the Scientific and Technological Information Division, Department of Science Services, offers patents and industrial standards services; the Technology Information Center, Technological Promotion Association (Thai-Japan) provides practical technical information such as trade
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catalogues; and Technical Information Access Center (TIAC) of STDB supplies an on-line information search service from a number of foreign databases. However, there are a lot of expressed needs for information not only from foreign sources, but also about domestic science and technology activities. Another complaint from manufacturers who want to export is the lack of internationally certified testing facilities to eliminate the need for testing products abroad. Technology Strategy of Thailand: The Seventh Plan The Seventh National Economic and Social Development Plan (1992-96) will have a chapter on Science and Technology Development (NESDB, 1991). Its essence is described briefly below. There are three main achievements in the development of science and technology to date. First is the creation of awareness in the role of science and technology among the populace. The top administrators in the government are becoming more supportive in the promotion of science and technology. Second, there is more R&D in the public and private sectors. The government has established STDB and the three national centers to fund R&D. For the private sector, it provides low-interest soft loans and a grant for R&D through a number of agencies, and fiscal incentives for R&D projects promoted by BOI. Third, about 1,200 scholarships for advanced degrees in science and technology in industrialized countries are being granted for future researchers and university teachers. The targets set by the Seventh Plan are: 1. To expand the use of technology in industry and agriculture to increase productivity at a rate of 2.6 and 1.8 percent per annum to support their expansion at a rate of 9.5 and 3.4 percent a year, respectively. 2. To increase the production of S&T manpower in the following categories: engineers from 9.8 to 14.9 persons per 10,000 population; scientists from 7.2 to 10.2; agriculturists from 6.7 to 10.5 and technicians from 141.5 to 221.5; and researchers (full-time equivalent research scientists and engineers) from 1.4 to 2.5. 3. To increase the R&D expenditure to 0.75 percent of GNP in 1996. It is to comprise 0.5 percent of GNP from the government and another 0.25 from the private sector. The strategies to achieve the above targets are: 1. Stimulate the private sector to utilize more technology by creating a competitive atmosphere, by providing fiscal incentives, by disseminating technologies to industries, by improving governmental regulations, and by supporting the development of specific technologies for the targeted
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industries. It is interesting to note that this is the first time that a Five-Year Development Plan has targeted industries at sector levels. They are metal working and machinery, electronics, textiles, food, plastic, gems and jewelry, and iron and steel. 2. Promote the utilization of modern technologies and management techniques to increase productivity and reduce cost by stabilizing the price of farm produce, promoting organizations of farmers, improving extension services, and increasing the role of the private sector in technology transfer. Specific measures are designed for each sector of agriculture, livestock, and fisheries. 3. Increase the efficiency of technology acquisition and transfer by building up bargaining power, by promoting the diffusion of imported technology, by upgrading the technological capability of state enterprises, and by monitoring the technology transfer program of large projects. 4. Develop S&T manpower by accelerating the production of scientists, engineers, mathematicians, technicians, and skilled labor in areas of high demand, building up the stock of university teachers and researchers, stressing the urgency for training, and improving the working environment of academic staff. 5. Organize the R&D system to support industrial development by concentrating R&D on the selection, adaptation, and improvement of imported technology, reorienting public R&D institutes to solve technical problems of industry, supporting research in education institutions to serve as S&T knowledge centers, and increasing the role of private sector R&D through fiscal and financial incentives, domestic markets development, and intellectual property protection, and developing R&D as a career for researchers. 6. Improve the S&T infrastructure by developing metrology, industrial standards, and product-testing systems, organizing the S&T information system, increasing the capability of engineering consultancy services, and creating the atmosphere and awareness of science and technology. Such a brief summary probably does not do justice to the Science and Technology Development Plan. Some of its features are discussed in more detail in the following section. Sectoral Technology Strategies Because the Science and Technology Development Plan has to satisfy a number of committees with representatives from all concerned government departments as well as the private sector, it needs to cover all aspects of S&T development. However, there has been a clear shift toward more private sector participation in practically all strategies. For R&D, the plan set a clear target of 0.25
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percent of GNP in the private sector by the year 1996. But only one of the six strategies mentions R&D. Most of them address the utilization, acquisition, transfer, and diffusion of technology as well as developing S&T manpower. Even then, R&D were to concentrate on selecting, adapting, and improving the imported technologies rather than on inventing new ones. Public sector R&D institutions are to be reoriented to solve industrial problems. These are signs that the plan takes a more pragmatic approach to the current S&T situation. Another significant feature of the plan is that it has for the first time targeted industries at sectoral levels. These industries are those crucial to the development of Thailand during the Seventh Plan or in a future time frame of only five years. Therefore, they tend to be those that already exist, rather than futuristic ones. The selection process involves economic analysis, technology assessment, and expert group prioritization. The main criteria used for economic analysis include industry growth potential, the competitiveness of international markets, and a linkage effect to select ten industrial groups out of seventeen from the I-O classification. Technology assessment based on the four factors of dynamism, versatility, viability and accessibility further narrows down the industrial groups to get a clearer picture. For instance, the electrical and electronic product group is limited to electronic products that have been growing dramatically. The other industries group is restricted to the gems and jewelry industry which generates very high employment and export earnings. Finally, six industries were selected using a group of experts to consider technological and market suitability as well as social and environmental impact. A technique called Analytical Hierarchy Process, or AHP, was used to get prioritized ratings for the selection. It happened that the six targeted industries here almost coincided with the six selected by another study group on strategic industries. The exception is that they picked iron and steel instead of gems and jewelry. Key technologies and technology strategies for all seven industries have been worked out and are described in sequence below.

Electronics Industry The key technologies identified include: computer-aided technologies; software engineering; circuit design; process technology; production management; and mechanical technology. Strategies for development include: promotion for investments in higher technology products manufacturing; promotion of needed supporting industries; promotion of product design; and development of target products such as personal computers, small PABX, mobile telephone, facsimile, and application-specific integrated circuits (ASIC). Metal-Working and Machinery Industries The key technologies include: computer-aided technologies; production management; and metal-working technologies such as casting, forging, machining,
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heat treatment, electroplating, and stamping. Development strategies include: promotion of investment in machine tools industry; promotion of metal-working industries; promotion of mold and die industry development; and development of automotive parts such as engines, transmissions, steering systems, and suspension systems. Petrochemical and Plastics Industry Emphasis in key technologies is aimed at the downstream plastic products industry. Key technologies identified include: compounding; molds for plastic products; and production management technologies. Development strategies include: improving plastics properties from commodity plastics to intermediate and engineering plastics; and establishing a design center to provide products and mold and die design. Textile Industry The key technologies include: the efficient use of modern machinery; production management; and textile chemical technology. Development strategies include: subcontracting of world-famous, brand-name garment manufacturing; promotion of investments for dyeing industry; and promotion for switching to modern machinery. Food Industry The key technologies include: sterilization; production management; packaging; and waste management. Development strategies include: planting of fruits and vegetables to industry standard; the use of modern machinery and incentives for waste utilization technologies.

Gems and Jewelry Industry The key technologies include: a set of color standards for gems; computeraided technologies; and precious metal metallurgy. Development strategies include: establishing gem standards; R&D in precious metal alloying; and tariff rate reduction for R&D equipment. Iron and Steel Industry The key technologies include: ladle technology; steel alloying. Development strategies include: increasing the efficiency of furnaces; acquiring alloy steel casting technology. Nearly all of the six selected industries have targeted computer-aided technologies and production management as important key technologies. They are therefore referred to as generic technology. Although metal-working technology has not been explicitly identified as a key technology in some of the industries, it is
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nevertheless a common fact that all industries to a varying degree possess production machinery and make products involving metal parts as constituents. Consequently, metal-working technology is included as another generic technology. In addition, there is another group of technologies that do not bear directly on manufacturing processes or product quality, but only on production cost and environment. these are referred to as auxiliary technologies that do not bear directly on manufacturing processes or product quality, but only on production cost and environment. These are referred to as auxiliary technologies and include energy conservation technology, which significantly affects the motor vehicle, metalworking and machining industries, the textiles industry, and the food industry, as well as waste management technology, which is vital in the food and textile industries. Strategy for Technology Acquisition The two most popular modes of technology acquisition are capital goods imports and foreign investment. In 1990, they totaled 362,008 and 74,818 million baht respectively. Foreign investments bring in product management technology and process technology but not design technology or product-specific technology. Machinery is sometimes imported with minimal instructions from suppliers on operational procedure, resulting in inefficient operation and insufficient maintenance of machines. Compared with the above import figure, technology payments through contractual arrangements on royalties, trademark, technical fees, and management fees totaling 5,334 [million] baht in 1989 were simply inadequate. They equaled a mere expenditure of 1.1 percent and 0.73 percent of the capital goods imported in 1989 on technology purchase and technical assistance, respectively. This means that Thai manufacturers have not been using licensing or consultancy as main modes of technology acquisition. Although it is certain that R&D activities will increase, judging from the performance of public R&D institutions on technology commercialization and levels of R&D activities in the private sector, it is unlikely that R&D will become the main mode of technology acquisition for Thai industry in the next few years. Mergers and acquisitions of foreign companies for technology are unlikely to be prevalent, despite some cases of acquisition for access to market. We therefore suggest here that subcontracting be used as a strategy for technology acquisition in the Seventh Plan. The high level of foreign investment presents a favored a condition for mutual benefits. This strategy fits in well with those for the development of the electronics, metal-working, and plastic industries described above. We must not be content, however, with only producing parts and components to order. After mastering product management and process technology, we should attempt to learn the product-specific technology and the design technology. This will enable us not only to attain high quality at low price and to build a more complex product that is close to the consumer, for higher value added. These are technological activities that lead from technology utilization and
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technology development ultimately to technology creation through R&D. A number of government policies are needed to facilitate the formation of a competitive subcontracting network, but further discussion of this is beyond the scope of this paper. Another strategy that has been employed by some governments of the NIEs is the purchase of technology by government agencies. Such technology is then transferred to domestic private manufacturers. This method is mainly used in cases of advanced technology that require large investment beyond the means of the private sector or constitutes major technology critical to the development of a large number of related industries. The Thai government may like to support the development of certain sectors through this method if it wants to be more proactive in technology acquisition. Conclusion This chapter has reviewed recent developments of the Thai economy and its policies. Although the economy is growing at a rapid pace, some weaknesses persist in technological capability and human resource development that will make such growth unsustainable in the long run. The present policy trend toward liberalization is good for industries and businesses, but there is a danger that the market economy will be pushed to an extreme. The two weaknesses mentioned above take a long time to develop and therefore cannot be expected to respond instantly to market forces. A senior government officials remark that the government is changing its role from controller to supervisor hopefully does not mean that government ought to know less. In fact, there is a great need for information in many fields in order to make decisions less fallible and planning more effective. Science and technology have yet to assert their influence on the economy of Thailand. Despite a number of programs to boost R&D in both the public and the private sectors, time is still needed for these efforts to bear significant fruits. If proper technology strategy is pursued, the technological capability of the country can be substantially improved by the end of the Seventh Plan. However, the ultimate limitation could be due to S&T manpower. This present shortage, if allowed to persist, will certainly have detrimental effects on investment and industry and can affect the development of the country as a whole. In the short term there is no choice but to import needed personnel and launch massive training programs. In the medium term, the ability of educational institutions to expand enrollment will be limited by the availability of teachers. In the long term there are more options and fewer excuses for not working out a good solution. Needless to say, effective implementation is more important than an immaculate strategic plan. A good NESDB plan can only serve as a guideline for 3 ministries to draw up their yearly implementation plans. It is up to the ministries to make the plans work. However, NESDB should closely monitor these plans to ensure conformity. On the other hand, long-term sectoral plans (beyond ten years)
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will need to be developed to guide Thailand into the type of society in which the people of Thailand want to live. ***

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