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The Political Economy of Industrial Development in Thailand

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The Political Economy of Industrial Development in Thailand The Political Economy of Industrial Development in Thailand Shangmao Chen Fo Guang University, Taiwan Abstract Since the 1990s, governments around the world have emphasized the core concepts of globalization. Many governments initiated a series of political policies regarding liberalization and privatization in response to the inevitable phenomenon. In Southeast Asia, Thailand participated in the development as well by reconstructing its financial system to allow greater foreign capital for investments. Unfortunately, the importance of prudential regulations was underestimated, and the neglect thereafter caused the Asian Financial Crisis which initially occurred in Thailand on the second of June, 1997. The Thai government received 17.2 billion US dollars from the International Monetary Fund (IMF) to stabilize its domestic situation and implemented structural reform to minimize losses from the crisis. Meanwhile, different voices regarding the policies for globalization were expressed. These opinions mainly referred to regionalization/ regionalism and localization/ localism. This study discusses how the Thai state transformed under globalization from three industries: the Telecommunication industry, the Automobile industry, and the Cultural Creative industry. This article observes that Thailand turned to take regionalization and localization into consideration, which in turn demanded the state to increase domestic autonomy and capacity. The findings also suggest that cooperation with other governments in the region to accelerate economic recovery from the crisis was inevitable. However, political instability and close state-business relations continue to make the future of Thailand uncertain. Keywords: Thailand, Regionalization, Localization, Industrial Development Aspiration Party) to step down from Introduction office and the succession of Chuan Leekpai (Democrat Party) as leader of the The Asian financial crisis in 1997 not government. Once in office, Chuan only caused severe damages to the Thai carried out globalization and economy, the event also caused Prime liberalization policies and accepted great Minister Chavalit Yongchaiyudh (New assistance from the IMF, World Bank and Journal of ASEAN Studies, Vol. 2, No. 2 (2014), pp. 62-79 ©2014 by CBDS Bina Nusantara University and Indonesian Association for International Relations ISSN 2338-1361 print / ISSN2338-1353 electronic 63 Journal of ASEAN Studies other international organizations, in the argues that after Thailand’s confrontation hope of leading the Thai people out of the with the globalization crisis, the country shadow of financial crisis with speed. turned to emphasize regionalization and However, such unconditional localization. Through economic liberalization policy generated significant cooperation and integration with other repercussions from the Thai people. It countries in the region, and improvement was under such condition that in the state’s institutional autonomy and telecommunication tycoon Thaksin capacity, the Thai government brought Shinawatra grasped the heart of the related industries onto the path of Thailand people and established the Thai economic recovery. However, Thailand’s Rak Thai Party in 1998. political instability in recent years and corrupt state-business relations continue In the 2001 general election, to make the future of Thailand uncertain. Thaksin’s policy appeal to nationalist and populist sentiments enabled him to defeat The structure of this paper is as the Democrat Party and become the follows: section one is the introduction; twenty-third PM of Thailand. Not only section two introduces the changing role did Thaksin implement many populist of the Thai state, including policies after entering office, under the regionalization, localization and state- suggestion of renowned business business relations; section three provides strategist Michael Porter and others, a brief introduction of Thailand’s Thaksin selected five industries as his key automobile, cultural creative and policy focus: tourism, fashion, food, telecommunication industries; section software and automobile (Ketels 2003; four uses the automobile industry to Porter 2003). The fashion, food and explain Thailand’s regionalization software industries are closely related strategy; section five uses the cultural with the cultural creative industry. The creative industry to explain how Thailand cultural creative and automobile responds to globalization through industries thus became important localization; section six explains how windows for Thailand to respond to the Thailand exploits state-business relations globalization crisis through to buffer its telecommunication industry regionalization and localization. and the negative impacts of political instability on related industries; section Based on the examples of the seven is the conclusion. telecommunication, the automobile and the cultural creative industry, this paper Changing Role of the State seeks to analyze the changing role of the Thai state under globalization. This paper 63 64 The Political Economy of Industrial Development in Thailand After the publication of Bringing the state capacity against globalization. It is State Back In in 1989, the state became the easy to see that globalization has caused focus of political and economic research local companies to face severe (Evans, Rueschemeyer & Skocpol, 1985). competition and influenced state capacity At the same time, the wave of in many ways. State capacity is therefore globalization began to emerge and caused the variable that best explains the great impact on the state. The zero-sum differences among industries of different framework of thinking of academics states in a globalized age (Evans 1997). regarding the relationship between globalization and the state began to The Emergence of Regionalization change. The academia began to emphasize the “enabling face of In the Fifth WTO Ministerial Meeting globalization”, which includes: (1) the of the Doha Round held in Cancun in increasing sense of economic insecurity, 2003, as a result of the inability to reach which demands the government to consensus and ensuing deadlock provide social security; (2) increased regarding the issue of agriculture, many competition among states, which states turned to the negotiation of demands the government to provide regional trade agreements (RTAs). more mechanisms for the creation of Regionalism has become a very important industries; (3) intensified competition concept of the international system today among key industries, which demands (Dent 2008, p.6). Regionalism can be the government to respond with new divided into two categories: open policies, strengthen supervision regionalism and closed regionalism. mechanisms and carry out structural reforms (Weiss 2003, pp.15-18). Open regionalism emphasizes the relationship between the state and the In order to break away from the zero- global market and regards regionalization sum framework of thinking regarding as a complementary stage that supports globalization, when analyzing the state participation in the process of phenomenon so called “globalization”, globalization. The regionalizing process we must emphasize the research can be considered as meso-globalization approach of domestic institution. The or a transitional phase before challenges of globalization and economic globalization. In short, regionalization liberalization do not deny the importance should not be seen as contradictory to of domestic institution. Rather, Deyo(1996, globalization (Munakata 2005, p.16). p.136) argues that we must place more Open regionalism can be further divided importance on the regulatory capacity into two branches: neoliberal regionalism and organization structure of domestic and the FDI model. The FDI model institution because they can increase the 65 Journal of ASEAN Studies emphasizes the importance of foreign In Thailand, the debate between direct investment for regionalization. globalization and localization has existed for a long time, especially after the Asian Closed regionalism focuses on the financial crisis (Hamilton-Hart 1999). relationship between the state and society After the Asian financial crisis, Chuan and places importance on distributional accepted the suggestions of IMF and or social justice and other non-economic carried out privatization, liberalization values. This category of regionalism and other reforms. However, these considers the regionalizing process as an reforms did not realize without negative oppositional force against globalization. consequences. Many of Thailand’s Legitimacy is an important basis for important companies fell into foreign decision makers when accessing ownership, which generated great regionalism. Closed regionalism is also discontent among the Thai population. divided into two branches: developmental regionalism and the In the birthday speech in 1997, the resistance model. Developmental King pointed out the importance of the regionalism places emphasis on the sufficiency economy based on the importance of domestic capital individual, the family and the state. He (Nesadurai 2003a, 2003b). pointed out that by carrying out sufficiency, not only can the country Under the influence of globalization, reduce the influences of both the domestic transnational corporations grew on a and international market, Thailand could massive scale and entered into also decide on whether to connect with developing economies. Southeast Asia the world or not, and not be forced into became the main
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