Variations of Value Creation: Automobile Manufacturing in Thailand

Abstract

The increasing integration of the Thai automobile industry into the global economy throughout the last three decades has been influenced by a number of factors. Although the general increase in demand has created the basic precondition for global automobile firms to serve this particular market, the way in which these automobile firms operate in the Thai economy is subject to regulatory frameworks operating at different geographical scales. Indeed, the exercise of institutional power at the national and macroregional scale, regulating automobile production and trade within Thailand and the ASEAN Free Trade Area (AFTA) has a significant impact on the way in which firms embed themselves into, and how value is created within, the Thai economy. However, the network configurations of the lead firms operating in Thailand vary significantly. The way and extent to which lead firms create and enhance value within this national economy are strongly dependent on the manufactured product.

Industrial policy and the development of the automotive industry in Thailand

“…the Thai government and Thai enterprises have little means to influence the strategies and operations of Japanese firms in Thailand', which dominate the industry. In contrast, Hassler (2009Hassler ( , 2244 concludes that the development of the Thai automotive industry 'has clearly been influenced by the institutional power of the state'. Rock (2001) argues, more generally, that in the period of the early import substitution industrial strategy in the 1960s through to the export-led industrialisation in the 1980s, Thai industrial policies with selective government intervention in collaboration with FDI were effective and successful.…”

“…Wad (2009, 190) and Athukorala and Kohpaiboon (2010, 13) both seem to present the abolition of LCR as a wholly positive aspect of economic liberalisation. Hassler (2009Hassler ( , 2236Hassler ( -2237, conversely, argues that LCR in the 1990s were a key part of a regulatory framework that significantly increased the territorial embeddedness of the motor industry in Thailand in the 1990s. He also notes that LCR continue for automotive exporters from Thailand (since 2004) in the form of the LCR of AFTA, the Association of South East Asian Nations (ASEAN) Free Trade Area, in order to qualify for preferential access to the markets of other ASEAN countries.…”

“…Some exporters have achieved greater economies of scale by product specialisation, like those making the one-ton pick-up trucks strongly encouraged by Thai tax policy. Hassler (2009Hassler ( , 2238Hassler ( -2240 has argued this specialisation also has been associated with a deeper structure of domestically based suppliers. However, this greater efficiency -which can be regarded as upgrading by those foreign firms -is partly achieved by the use of labour-saving robotics, so the employment gains of increasing output are muted.…”

“…We have less to say about the upgrading of individual Thai firms, since this is already discussed in the existing literature (e.g. Busser 2008;Hassler 2009;Ueda 2007;and Ueda 2009). …”

“…With regard to the upgrading of the Thai labour force, Japanese assemblers have necessarily engaged in training (Hassler 2009(Hassler , 2242. Also, the Thai government in association with the Japanese government introduced a public-private collaborative human resource development programme for automobile components suppliers, the so-called 'Automotive Human Resource Development Project (AHRDP)' in 2006.…”