Project Outline Export Capacity Building in Thailand and Japan’s Cooperation Yasutami Shimomura, Hosei University, Japan 1. Purpose This project attempts to examine the process of export capacity strengthening in Thailand through Japan’s economic cooperation in the 1980s, highlighting the synergy effects of two crucial elements: a) the impacts of the first White Paper on the Restructuring of Japanese-Thai Economic Relations, and b) the role of Eastern Seaboard Development Plan. There is an idea widely shared in the international aid community: attracting foreign direct investment paves a road to market based and outward oriented industrialization. This is not wrong but simplistic. For successful transformation of industrial and export structure, a developing country needs to meet among others two requisites or two types of infrastructures (hardware and software). To attract sufficient foreign investors, a developing country must prepare hard infrastructure, and to make accumulated investment sustainable, the country must gain soft infrastructure, in other words various knowledge and skills. This project attempts to show how Thailand and Japan worked together for meeting such requisites or gaining sufficient export capacity. 2. Research plan This project focuses its attention on two crucial aspects which had considerable effects on building export capacity in Thailand in 1980s. First, it analyzes what kinds of activities were taken in the Japanese side in response to the White Paper on the Restructuring of Japanese-Thai Economic Relations, and how these activities led to stronger software capacity of export. For this purpose, various public and private documents are to be studied in order to trace the interaction between two countries. Second, it examines the roles of the Eastern Seaboard Development Plan as a hardware capacity of export. This gigantic regional development plan was composed of two industrial complexes with deep seaports. One of the purposes was to construct export bases. The construction was financed mainly by Japan’s aid. The study in this part was almost completed already. Note 1: impacts of the White Paper The first White Paper was prepared by the Thai government and sent to the Japanese government at the end of 1985. Reflecting expanding trade deficit with Japan and strong will of Thai side to transform the export structure from primary to sophisticated manufacturing goods, the White Paper was full of critical remarks on the Thai Japanese economic relations, and strongly required Japan a) to open market further, b) to shift direct investment from import substitution to export oriented industries, and c) to reduce the ratio of contracts with Japanese companies under official development assistance (ODA). The Japanese government concerned about the rising anti-Japanese feeling among Thai people. Therefore, in response to the Thai initiative, it drafted a concerted program for promoting foreign direct investment and technical transfer. While this was a public document, it was conducted by broad based actors in public and private sectors, such as JETRO (Japan External Trade Organization), big trading companies (sogo shosha), and grass rooted organizations such as unions of craftsman and local chambers of commerce. New foreign direct investment furnished the Thai economy with competitive production facilities and modern production management. Technical transfer by various actors provided valuable knowledge and know-how of marketing, designing packaging etc., and made Thai products competitive in international market. The case of the first White Paper is valuable because of strong ownership by the Thai side in overcoming constraints. This case is unique because it provoked concerted activities among trade, investment, and aid in the Japanese side. This case is also unique, because of the participation of small private organization such as unions of craftsman and chambers of commerce of small cities in Japan. These grass rooted organizations sent missions and held seminars usually under the coordination by JETRO and big trading companies. However it should be stressed that in many cases they attempted technical transfer to Thai counterparts as volunteers. Note 2: mission of the Eastern Seaboard Development Plan The Eastern Seaboard Development Plan was composed of two industrial complexes with deep seaports (Laem Chabang and Map Ta Put) together with a wide variety of other facilities. According to the master plan, the estimated total investment amount was estimated around $4.5 billion (1981 price). The Laem Chabang was designed for export-oriented and labor intensive industries and the Map Ta Put for heavy and chemical industries based on natural gas being developed in the Gulf of Thailand. The mission of the plan was to tackle two basic problems Thailand was faced with. The one was to transform leading export goods to manufacturing products. This was one of the central agenda items of the Fourth and Fifth Five-Year Plan. The other was to improve the living standard in rural areas, which was a long standing issue since the Third Five-Year Plan. Constructing such a huge plan was a controversial issue under economic stagnation during the first half of the 1980s. There was a split in the opinion in Thailand and among major donors. The World Bank urged to postpone the project drastically to reduce fiscal burden, and the Japanese government insisted that the strengthening competitiveness was urgent task. It was to be noted that the Thai government was patiently in pursuit of minimizing the cost of the worst case. Again strong ownership is found. After the completion, these industrial complexes in particular the Laem Chabang much contributed to reduce serious bottlenecks in infrastructures in the post Plaza Accord era.
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