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World Bank Document 46194 Public Disclosure Authorized Towards a Knowledge Economy in Thailand Public Disclosure Authorized Public Disclosure Authorized Office of the National Economic The World Bank and Social Development Board (Thailand) Public Disclosure Authorized ACKNOWLEDGMENT This report is the fruit of continuous collaboration between the National Economic and Social Development Board (NESDB) and the World Bank. This report was prepared by a joint NESDB-World Bank team. The World Bank team members were Shahid Yusuf (Team Leader), Kirida Bhaopichitr, Kaoru Nabeshima, and Douglas Zeng with Jimena Luna and Wei Ha. The NESDB team comprised of Piyanuch Wuttisorn, Jinna Tansaraviput, Soontraluck Petchkoon, Wanchat Suwankitti, Angkana Chaiwiriya, Apiradee Wongkitrungrueng, and Kampree Sethaputra. The teams received overall guidance from NESDB Deputy Secretary Arkhom Termpittayapaisith, NESDB Senior Advisor Thanin Pa-em, and Kazi Matin (Lead Economist, World Bank). The production of this document was expertly handled by Ella Yadao and Ruangrong Thongampai at the World Bank. The report has benefited greatly from the collaboration of representatives from academia, government agencies, and private sector in providing invaluable inputs during the several focus groups meetings that were held during the preparation of the report. The NESDB-WB team wishes to sincerely thank all the representatives. We are particularly indebted Dr. Sakarindr Bhumiratana (President, National Science and Technology Development Agency), Associate Professor Sutham Vanichseni (Chairman, SVI Initiative Co. Ltd.), and Dr. Vudhipong Techadamrongsin (Deputy Director, Thailand Research Fund) for kindly providing insights and information to sharpen the accuracy and policy implications of this report. Towards a Knowledge Economy in Thailand II Table of Contents ACKNOWLEDGMENT............................................................................................................. I Executive Summary ..............................................................................................................VI Increasing Productivity................................................................................. VI Indicators of Competitiveness.......................................................................IX Constraints on Technology Development .....................................................IX Strengthening the Knowledge Economy .......................................................XI Volume and Quality of Education ................................................................ XII Skills Development ...................................................................................... XII Raising Spending on R&D........................................................................... XIII Links with Universities and Intermediaries ................................................ XV Part 1 Strengthening the Knowledge Economy and Technological Capability in Thailand... 1 I. Introduction........................................................................................................... 1 II. Recent Growth Performance............................................................................... 2 Sources of Growth: Factor inputs and TFP ................................................... 5 Sources of Growth: Demand Related ............................................................. 8 Trade and Competitiveness............................................................................ 9 Foreign Direct Investment............................................................................ 19 Global Competitiveness ................................................................................ 22 Part 2 Aspects of the KE: International Experience............................................................ 35 I. Attributes of a Knowledge Economy ................................................................. 35 Building Human Capital: Secondary and Tertiary Education ...................... 35 University-PRI-Industry Linkages .............................................................. 38 Public Research Institutions (PRIs) as Technology Incubators................... 39 Industrial Clustering ..................................................................................... 44 II. How Intermediaries Can Contribute.................................................................. 47 Knowledge Integrating Community (KIC) .................................................... 47 Co-op Program at the University of Waterloo ............................................ 50 TAMA Association........................................................................................ 50 III. Lessons for Thailand’s Software and Fashion Industries ............................... 52 India’s Software Industry: Lessons for Thailand......................................... 52 The Fashion Industry: International Lessons for Thailand ......................... 58 Part 3 Developing Technological Capability in Thailand..................................................... 62 I. Organizational Infrastructure ............................................................................. 63 II. Fiscal Incentives:............................................................................................... 66 III. Secondary and Tertiary Education in Thailand............................................... 74 Secondary Education .................................................................................... 75 Higher Education .......................................................................................... 79 Towards a Knowledge Economy in Thailand III Education Policy Initiatives .......................................................................... 83 Scientific Publications of Thai Universities................................................. 84 Thailand: The State of University-Industry Linkages ................................ 87 Thailand’s Industry Clusters ........................................................................ 92 Role of Information and Communications Technology (ICT) ...................... 96 IV. Thai Firms’ Efforts to Innovate ..................................................................... 100 Electronics industry.................................................................................... 100 Construction Industry ................................................................................. 102 Auto Parts Industry..................................................................................... 103 Part 4 Policy Directions..................................................................................................... 106 I. Virtuous Spirals and the Business Environment.............................................. 108 II. Skills ................................................................................................................ 110 III. R&D in Thailand: Learning from Others........................................................ 112 Research Cooperation ................................................................................ 115 Incentives for R&D ..................................................................................... 116 Role of Universities and University Industry Linkages............................. 116 Annex A Competition Policies in East Asia and Thailand ...................................................... i International Experience ................................................................................. i Design of an Effective Competition Policy Framework.................................. i Experience of Taiwan and the Republic of Korea ........................................ iii Current Situation in Thailand ........................................................................ iv Annex B ICT and Economic Growth ..................................................................................... vi I. Sector-specific Experience and Recommendations.......................................... vii Telemedicine ................................................................................................ vii E-tourism..................................................................................................... viii ICT and the Auto Industry............................................................................. ix E-Government ................................................................................................ x Annex C Thailand ICT Policy and Performance ................................................................. xiii Annex D Financial Incentives for R&D Technology Development and Innovation in Thai Firms xvi List of Figures Figure 1.1: Thailand GDP Growth......................................................................................... 3 Figure 1.2: GDP by Sectors .................................................................................................. 4 Figure 1.3: Labor Productivity: Overall and by Sector, ....................................................... 7 Figure 1.4: Export Volume Growth: 2002–05 .................................................................... 11 Towards a Knowledge Economy in Thailand IV Figure 1.5: Growth Rates of Total Export Earnings .......................................................... 11 Figure 1.6: Inflows, Outflows, and Net FDI, 1995–2005 .................................................... 20 Figure 3.1: Thailand’s Governmental Organizational Structure for STI
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