State and Industrial Policy: Comparative Political Economic Analysis of Automotive Industrial Policies in Malaysia and Thailand
TL;DR: In this article, the authors examined the differences between the neoclassical and national development schools of economics on how an economy should develop and found that although industries in developing countries need government assistance, the specific political and economic contexts of each country affect the policies adopted and their effectiveness.
Abstract: Numerous differences exist between the neoclassical and national development schools of economics on how an economy should develop. For example, should the state interfere in the market using state resources, and cultivate certain industries to achieve specific developmental goals? Although the automotive industries in both Thailand and Malaysia developed in the 1970s with considerable government involvement, they have evolved along very different lines. Can these differences be traced to different interactions between the state and industry in these two countries? This paper examines this issue and finds that although industries in developing countries need government assistance, the specific political and economic contexts of each country affect the policies adopted and their effectiveness. The choice between “autonomous development” (Malaysia) and “dependent development” (Thailand) is the first issue. The second issue is that politics in Malaysia has deterred the automotive industry from adopting a “market following” position. This paper finds that the choice of strategy and political interference are the two main reasons the automotive industry in Malaysia is less competitive than that in Thailand.
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29 Nov 2019
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Cites background from "State and Industrial Policy: Compar..."
...However, the government opened the automotive market and attracted MNEs after realizing that high car prices caused by protectionist measures would limit the domestic demand for cars (Tai and Ku, 2013; Ariffin and Sahid, 2017)....
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TL;DR: In this paper, the authors compared the evolution of automotive sectors in Malaysia, Thailand, and China with that of Korea by focusing on industrial policy, particularly local content requirements (LCRs) and global value chains (GVCs).
Abstract: This study compares the evolution of automotive sectors in Malaysia, Thailand, and China with that of Korea by focusing on industrial policy, particularly local content requirements (LCRs) and global value chains (GVCs). Although LCRs show common effects of increasing the localization ratio to a certain degree, the eventual development paths of automotive sectors diverge in the three countries. In terms of three measures of upgrading in GVC, namely, the share of domestic (or foreign) value-added in their exports, export orientation (re-exported intermediate imports), and international competitiveness of their intermediate parts (domestic value-added embodied in foreign exports), China is the most successful (highest in two measures), followed by Thailand with strong export orientation, and with Malaysia being the least successful. Such divergent outcomes in three countries are explained in terms of three key factors, namely, local ownership, disciplines from market competition, and firm-level effort and strategies. Given the monopoly by national brand makers, Malaysia lacks discipline from market competition, whereas Thailand lacks local ownership and consistency in promoting domestic value-added. China is neither a national monopoly nor dominated by foreign joint ventures, but a strong entry by locally owned firms result in fierce market competition. In addition, Chinese firms attempt to build their technological capabilities and localize the production of key parts and components.
16 citations
TL;DR: In this article, the authors show that the leading export sectors are not manufacturing (such as electronics) in Malaysia or mining alone in Chile, but instead resource-based sectors (petroleum, rubber, palm oil, and wood-based), and that the sustained growth of these sectors is not the result of free-markets, as frequently argued, but also of specific industrial policy measures that have enabled the accumulation of productive and innovation capabilities through R&D support, fiscal incentives, export assistance, and quality control.
Abstract: This paper starts by showing that Chile and Malaysia are on the path of escaping the middle-income trap in terms of their income level relative to that of the USA In contrast to the conventional view, we find that the leading export sectors are not manufacturing (such as electronics) in Malaysia or mining alone in Chile Instead, the engines of growth have been (1) resource-based sectors (petroleum, rubber and palm oil) in Malaysia; and (2) non-mining resource-based sectors (salmon, fruits, wine and wood-based) in Chile Furthermore, the sustained growth of these sectors is not the result of free-markets, as frequently argued, but also of specific industrial policy measures, that have enabled the accumulation of productive and innovation capabilities through R&D support, fiscal incentives, export assistance, and quality control We also find that the emergence of locally-controlled firms has been an important aspect of this long-term success, although the sources of the initial learning included foreign actors and FDI The cases of Chile and Malaysia consequently show the possibility of escaping the middle-income trap not through manufacturing but instead through resource-based development Such strategy differs from the so-called short cycle technology-based catch-up by the East Asian tigers and from the unsustainable commodity rent-extraction in resource-rich countries, but is consistent with the view that emphasizes the need to specialize in sectors with low entry barriers, and to promote investments in innovation and technological capabilities
16 citations
References
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TL;DR: Korea's mode of industrialization as mentioned in this paper, the state and business: history and policies A history of backwardness The ABCs of Japanese and Korean accumulation The growth dynamic The spiraling of market power Getting relative prices "wrong": A summary Part II: Salaried management and human resources: The rise of salaried managers: Automobile manufacturing The paradox of "unlimited" labor and rising wages The boom in education Part III: The dynamics of dynamic comparative advantage: The switch in industrial leadership The world's largest shipbuilder The triumph of steel
Abstract: Korea's mode of industrialization Part I: The state and business: History and policies A history of backwardness The ABCs of Japanese and Korean accumulation The growth dynamic The spiraling of market power Getting relative prices "wrong": A summary Part II: Salaried management and human resources: The rise of salaried managers: Automobile manufacturing The paradox of "unlimited" labor and rising wages The boom in education Part III: The dynamics of dynamic comparative advantage: The switch in industrial leadership The world's largest shipbuilder The triumph of steel From learner to teacher
3,536 citations
Posted Content•
TL;DR: Amsden as mentioned in this paper showed that South Korea is one of a series of countries (ranging from Taiwan, India, Brazil, and Turkey, to Mexico, and including Japan) to have succeeded through borrowing foreign technology rather than by generating new products or processes.
Abstract: While much attention has been focused on Japan's meteoric rise as an economic power, South Korea has been quietly emerging as the next industrial giant to penetrate the world market. South Korea is one of a series of countries (ranging from Taiwan, India, Brazil, and Turkey, to Mexico, and including Japan) to have succeeded through borrowing foreign technology rather than by generating new products or processes. Describing such countries as `late-industrializers,' Amsden demonstrates why South Korea has become the most successful of this group. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/0195076036/toc.html
3,145 citations
2,593 citations
"State and Industrial Policy: Compar..." refers background in this paper
...These scholars offer an extremely different explanation from neoclassical economics (Jomo, 1994): 461-508)....
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Book•
01 Jan 1998
TL;DR: A New Geo-Economy: A Brief Historical Perspective The Global Economic Map Trends in Production, Trade and Investment as discussed by the authors, and the Processes of GLOBAL SHIFT Introduction Traditional Explanations and the Need for a New Approach 'The State Is Dead... Long Live the State' National Variations in Policy Stance Technology The 'Great Growling Engine of Change' Transnational Corporations The Primary 'Movers and Shapers' of the Global Economy 'Webs of Enterprise' transnational corporations within Networks of Relationships Dynamics of Conflict and Collaboration 'Both Transnational
Abstract: A New Geo-Economy PART ONE: PATTERNS OF GLOBAL SHIFT Introduction A Brief Historical Perspective The Global Economic Map Trends in Production, Trade and Investment PART TWO: PROCESSES OF GLOBAL SHIFT Introduction Traditional Explanations and the Need for a New Approach 'The State Is Dead ... Long Live the State' National Variations in Policy Stance Technology The 'Great Growling Engine of Change' Transnational Corporations The Primary 'Movers and Shapers' of the Global Economy 'Webs of Enterprise' Transnational Corporations within Networks of Relationships Dynamics of Conflict and Collaboration 'Both Transnational Corporations and/f003 /f001States Matter' PART THREE: GLOBAL SHIFT: THE PICTURE IN DIFFERENT SECTORS Introduction The Choice of Case-Study Sectors 'Fabric-ating Fashion' The Textiles and Clothing Industries 'Wheels of Change' The Automobile Industry 'Chips and Screens' The Electronics Industries 'Making the World Go Round' The Internationalization of Services PART FOUR: STRESSES AND STRAINS OF ADJUSTMENT TO GLOBAL SHIFT Introduction A Summary Perspective Making a Living in the Global Economy Issues of Global Governance
990 citations
"State and Industrial Policy: Compar..." refers background in this paper
...The application of automotive industry technology often expands to other industries, thus contributing greatly to the national economy by promoting technological abilities, increasing employment opportunities, and revenue (Dicken, 1998: 316; Humphrey, 2000: 245-271)....
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Book•
01 Jan 1979TL;DR: In this paper, the authors analyze Brazil's recent accumulation of capital in the light of its continued dependence, focusing on the relationships among multinational corporations, local private entrepreneurs, and state-owned enterprises that have developed in Brazil over the last decade.
Abstract: In order to analyze Brazil's recent accumulation of capital in the light of its continued dependence, Peter Evans focuses on the relationships among multinational corporations, local private entrepreneurs, and state-owned enterprises that have developed in Brazil over the last decade. He argues that while relations among the three kinds of capital continue to be contradictory, a triple alliance has been formed that provides the social structural basis for the pattern of local industrialization that has emerged. The author begins with a review of the theories of imperialism and dependency in the third world. Placing the Brazilian experience of the last twenty years in its historical context, he traces the country's evolution from the period of "classic dependence" at the turn of the century to the current stage of "dependent development." In conclusion, Professor Evans discusses the implications of the Brazilian model for other third world countries. Examining the nature of the triple alliance as it is manifested in such industries as pharmaceuticals, textiles, and petrochemicals, the author reveals the complex differentiation of the groups' roles in industrialization and lays bare the grounds for their collaboration and their conflict. He consequently shows how the differing interests, power, and capabilities of the three groups have combined to produce a system promoting industrialization that benefits the elite partnership but excludes the larger population from the rewards of growth.
965 citations