1

“Detroit in Asia”: Ideology, the State and Regional Development Policy

in Thailand

Richard Child Hill & Kuniko Fujita Sociology Department

Michigan State University East Lansing, Michigan 48823

USA

Email: hillrr@msu.edu, fujitak@msu.edu

Paper prepared for a Workshop on Neoliberalism in East Asia, National University of Singapore, November 15-16, 2007.

2

“Detroit in Asia”: Ideology, the State and Regional Development Policy

in Thailand

Richard Child Hill & Kuniko Fujita

1. Introduction This paper examines the interplay between neoliberalism and

developmentalism in the formation and execution of urban and regional

development policy in Thailand. The study centers upon an industrial estate and

a transnational corporation and the institutional and policy relationships at

various geographical scales in which they are embedded. The Eastern

Seaboard Industrial Estate (ESIE) in Rayong Province, and the estate’s star

tenant, Automotive Alliance Thailand (AAT), lie at the strategic and spatial heart

of Thailand’s export industrialization program, the foundation upon which the

country’s hopes for catching up with more developed countries rests. The ESIE

and the AAT can be viewed as spaces where U.S. centered global neoliberalism

and Japan centered regional developmentalism intersect and engage with a Thai

political-economic regime that, while volatile and multifaceted, continues to be

dominated by patrimonialism.

2. The Neoliberal Problematic in the East Asian Context

Western Neoliberalism

This study is couched within what might be called, the “neoliberalism

problematic” (NLP): an analytic framework that poses questions and seeks

answers about the role of neoliberal ideology in contemporary social change. 1

3

Neoliberalism is a body of political economic thought that advocates

organizing society on the model of an idealized free market economy. The

doctrine is rooted in classical economic liberalism but differs from its

philosophical parent in certain respects. Whereas the classical doctrine confines

itself to the economy alone, neoliberalism extends the market model to the

political and social spheres. And whereas its progenitor depicts the market as

natural and self-regulating, neoliberalism attempts to bring the utopia to life via

law and public policy (Brown 1996: 694). The neoliberal creed views individual

initiative as the mainspring of economic progress; promotes free markets in land,

labor and money; models the state on the enterprise, the citizen on the

consumer, and governance on business management.

Neoliberalism’s bete noire is Keynesian liberalism, sometimes called

“embedded” or “egalitarian” liberalism because Keynes prescribed government

regulation, demand management and progressive taxation to ameliorate the

excesses of free market capitalism. The Keynesian project entered political life

in the 1930’s, in response to the Great Depression, and flourished into the 1970s

until the breakdown of the international monetary regime, crises in mass

production industries, and fiscal contradictions in the welfare state catalyzed the

neoliberal political project.

The neoliberal creed runs deepest in the Anglophone countries, where the

ideology originated, and least so in countries with fundamentally different cultural

histories and political traditions; between ideological core and periphery are

many gradations and permutations in commitment to the creed. As the doctrine

4

spreads among nations, it weighs into the balance of local political forces, it

interacts with competing institutional legacies, and it combines with different

kinds of governance practices. Cities and regions play a key role in the uneven

spread of neoliberalism, as sites where neoliberal policies are applied, contested

and selectively appropriated.2

East Asian Developmentalism

Developmentalism is a body of political economic thought that advocates

state managed markets in the national interest. Developmentalism reflects the

needs of late industrializing nations attempting to catch up with more advanced

capitalist economies. The doctrine emerged in reaction to classical economic

liberalism which it viewed as a rationale for Western imperialism. The

developmentalist creed explicitly rejects the self-regulating market ideal, and the

individualism underlying it, calling instead for cooperative relations among

government, business and labor under state leadership to speed the adoption of

new technology, reduce production costs and expand global market share (Hatch

and Yamamura 1996:220).

Developmentalists also reject the neoliberal vision of a non-interventionist

state.3 The international competition, technology gap and barriers to saving for

investment facing late developers are so daunting that without government

intervention, little gets done. Instead, as development economist Alice Amsden

(1989: 40) succinctly puts it, “the art is to get something done with intervention.”

The prime mechanism for “getting something done” is the developmental

state. In Chalmers Johnson’s (1987:145) ideal typical formulation, the East

5

Asian developmental state evinces 1) stable rule by a political-bureaucratic elite

strong enough to contain interest group demands that would deter economic

growth;4 (2) public/private cooperation guided by a planning agency; (3)

sustained investment in mass education; (4 relative equity in income

distribution5; and (5) methods of economic intervention based upon market

incenti

o

source tition.

n,

e

ast

here

Singapore most closely approxim entalist model.

ves.6

In contrast to the neoliberal policy paradigm of free trade, financial

liberalization, privatization and deregulation, developmentalists advocate

selective protection of domestic markets from foreign import competition;

domestic control over the capital market; and aggressive industrial policies t

upgrade manufacturing and generate export strength. From the neoliberal

perspective, developmentalism isn’t simply an ideological challenge, it is a

of unfair mercantilist advantage in international economic compe

As with the advance of neoliberalism in the West, the spread of

developmentalism among nations in the Asian Pacific has been uneve

contested, shaped by local context and selective appropriation. The

developmentalist creed runs deepest in Japan, the first nation-state in East Asia

to assume developmental functions and the first to successfully catch up with th

Western capitalist powers. The creed is more ingrained in Japan’s Northe

Asian neighbors, South Korea and Taiwan, than in Southeast Asia, w

ates the developm

3. Detroit in Asia

6

Our exploration of the interplay between neoliberalism and

developmentalism in Thailand begins and ends with the Eastern Seaboard

Industrial Estate (ESIE) and Automotive Alliance Thailand (AAT). Self-styled as

the “Detroit of Asia,” ESIE houses an aggregation of transnational au

tomobile

re

IE’s

em

In this paper,

and after having worked through salient

aspects of the global, region nal contexts in which the

companies in Rayong Province, southeast of Bangkok. AAT, ESIE’s signatu

tenant, is an alliance between Ford and Mazda Motor Corporations.

We made several research visits to ESIE between 1999 and 2003 to

conduct interviews and gather documents at AAT, at six AAT suppliers, at ES

administrative offices, and at local, regional and national government bureaus

and institutes involved in various ways with AAT and ESIE operations. That

research was part of a comparative study of the Ford/Mazda production syst

in three national settings: Detroit, USA; Hiroshima, Japan; and Rayong, Thailand.

7 While we looked at the Thai policy environment in that study, we focused

mainly on the hybrid organization of AAT’s production system.

we investigate the nested policy relationships in which ESIE and AAT are

embedded, focusing upon the interplay between neoliberalism and

developmentalism at different institutional and geographical scales. We re-

introduce ESIE and AAT case study material toward the end of the paper,

reframed to show the interplay between neoliberalism and developmentalism at

the local production system level,

al, national, and subregio

estate and the company operate.

4. Global Neoliberalism

7

As nuclei in Thailand’s export industrialization drive, ESIE depends upon

foreign direct investment and AAT upon access to international markets. So,

both the estate and the company are strongly affected by Thailand’s international

trade, l scale

nd

, and

e world economy

beginn

nd

e

finance and foreign investment regime. And it is at the internationa

that neoliberalism has exerted its greatest influence in Thailand.

There are two principal, and closely related, mechanisms behind

neoliberalization in Thailand; the nation’s geopolitical alliance with the United

States and its long standing relationship with the International Monetary Fu

(IMF) and the World Bank. Thailand was a staunch military ally of the U.S.

throughout the Cold War and remains so today. In the Cold War divide in

Southeast Asia, the USSR supported Communist China and North Vietnam

the USA supported Thailand and South Vietnam.8 The United States largely

accepted East Asian developmentalism during the Cold War, despite the

ideological differences with economic liberalism, in order to secure capitalist

allies against Communist adversaries. China’s opening to th

ing in the late 1970s, and the collapse of the Soviet Union at the end of

the 1980s, altered the geopolitical context (Beeson 2007).

Freed from Cold War constraints, experiencing a slumping economy a

an economic challenge from Japan, the U.S. mounted a program to spread

neoliberalism on a world scale. The resulting “Washington Consensus”, so

called because it was agreed to by the G-7 states, has been promoted most

vigorously by the International Monetary Fund, the World Bank, the World Trad

Organization, and Washington’s “Wall Street-Dollar Regime (Gowan 1999).

8

Since the late 1970s, the IMF has made its loans to Thailand and other

nations in financial distress conditioned upon neoliberalism modeled “structural

adjustments” to their political economies, including cuts in government spending,

competitive exchange rates, privatization of state enterprises and liberalization of

foreign trade and investment (Rodrik 2002: Table 1).

larger

rivate sector. The Fund has operated, in effect, as the leader of a

credito

has

nd

risis

w Public

rn

9 The IMF’s power derives

from its ability to cut off not only its own credit but also most loans from the

World Bank, other multilateral lenders, wealthy country governments, and much

of the p

r’s cartel answerable primarily to the U.S. Treasury Department (Gowan

1999).

Thailand joined the World Bank in the 1950s and since then the Bank

been involved, in one way or another, in most of Thailand’s major development

efforts. A 1957/58 World Bank Report advised the Thai government on the

nation’s shift from agriculture to industrialization. The Bank helped finance a

build Thailand’s postwar highway system.10 Thailand’s first 3 national five-year

plans were written by advisers nominated by the U.S. government and they

followed a World Bank development strategy. The Bank has joined the IMF in

providing Thailand with structural adjustment financing during economic c

periods. Recently, the Bank has promoted a neoliberalism inspired Ne

Management program to reform Thailand’s bureaucracy (Painter 2005).

As a member of the WTO, Thailand supports multilateral trade

liberalization and has been incrementally lowering its trade barriers.11 But

Thailand’s tariffs are still relatively high compared to other WTO members (Ahe

9

and Morrison 2005: 8).12 The Thai government is also relatively open to FD

has been incrementally relaxing limits on foreign ownership in various secto

over the past decade (Brimble 2002).

I and

rs

e union opposition and has been

delaye

after

.

on

aluing the currency and precipitating a downward spiral

that sp

ign

own

the Thai Baht. Then, the IMF provided huge loans, not to rescue Thailand’s

13 At the behest of the IMF, Thailand

started to privatize state owned telecommunications, energy and transport

companies (Kubo 2006), but the plan met intens

d indefinitely.14 Domestic services such as construction, architecture,

engineering, law and accounting are protected.

Thailand experienced a huge inflow of foreign capital in the 1980s

the government changed its laws to support export industrialization and

liberalized the financial sector and capital account. The influx of foreign

investment and loans set off a decade long “great boom” in Thailand’s economy

The boom produced a bubble. The bubble burst when hedge fund speculati

against the nation’s currency caused the value of the Baht to drop. The falling

Baht led foreign investors to turn off credit and pull out large sums from the

country, thus further dev

read across the region and culminated in the now infamous 1997/1998

Asian financial crisis.15

The financial crisis did serious damage to Thailand’s economy but the

political ramifications were even greater. The crisis embittered Thailand’s

relations with the IMF. The IMF and U.S. Treasury Department had initially

pressured Thailand to liberalize its capital account. That made it easy for fore

investors to withdraw their capital from the country, the move that brought d

10

economy, but to bail out foreign creditors. Finally, as Thailand’s economy

weakened, the Fund told the nation to cut expenditures, thereby accelerating the

downturn (Bello 2007).

rce of

s Thai

ral

industrial policy, and long-term economic planning.

uth

mphasis on

advantage and the importance it attaches to a

l

pporting

5. Regional Developmentalism

Given the high profile of the Wall Street Dollar Regime, it may come as a

surprise to learn that Japan, not the United States, is Thailand’s largest sou

foreign aid and foreign direct investment16 (See Table 1). Japan’s foreign

assistance and loan programs are often designed to facilitate the overseas

activities of Japanese companies (Hatch and Yamamura 1996). The Japanese

government advocates developmentalist thinking in Thailand and influence

policy in arenas underplayed if not ignored by neoliberalism, but of crucial

significance to the operations of ESIE and AAT: manufacturing and secto

national and regional

[Table 1 About Here]

Japan’s understanding of how successful late development occurs is

based on its own experience and that of the East Asian NICs, especially So

Korean and Taiwan.17 Japanese developmentalism is distinguished from

Western neoliberalism by its long term view, its regional outlook, its e

dynamic comparative

developmental state.

In the Japanese view, catching up requires long-term growth strategies.

Industrialization occurs in successive stages demarcated by increased technica

and organizational capacity: labor intensive manufacturing; heavy su

11

industries; assembly-based mass production of consumer durables;

mechatronics based, R&D driven, flexible manufacturing of highly differentia

goods. Asian Pacific countries are bound together in a “flying geese” or “V

formation” division of labor based upon stages of specialization and produ

cycles. Countries at each tier of the regional formation import advanced

products, components, equipment and FDI transplants from countries on higher

tiers and export more mature goods, equipment and FDI transplants to count

on lower tiers. Industrialization proceeds by geographical spreading among

countries and structural deepening within countries. Countries occupy differen

roles in the dynamic regional division of labor and improve their technological

sophistication over time. The industrial upgrading process is sta

ted

ct

ries

t

te guided and

e

Taiwan,

mic project

facilitated with public funds but driven by market competition.18

Japanese corporations initiated the East Asian production network in th

context of trade with the USA and the EU and Japan is the regional leader in

product and process innovation. FDI and foreign assistance from Japan, and

now from countries in the next tier of the V formation (South Korea,

Singapore, Hong Kong) are the primary mechanisms for spreading

industrialization to less developed nations in the region. As the self-conceived

head of the V formation, Japan can be viewed as the ideological center of East

Asian developmentalism, and the promoter of a transnational econo

that is also deeply political in nature (Hatch and Yamamura 1996).

Japan’s regional outlook and emphasis on “created” comparative

advantage can be seen in its support for the ASEAN Industrial Cooperation

12

Scheme (AICO), a program that promotes joint manufacturing activities among

ASEAN based companies.19 Japan’s argument that national policy makers

Southeast Asia should coordinate their outlays on public infrastructure and

allocate segments of an industry among themselves according to an agreed

upon blueprint so as to encourage complementary investments shows how

Japanese policy thinking

in

far

departs from market fundamentalist ideas about

A)

sparent

t

eable

y that holds economic growth to be the

suprem

te is

al

comparative advantage.

Japan’s criteria for allocating overseas development assistance (OD

differs markedly from the Washington Consensus. Aid to less developed

countries should not be conditioned upon privatization, free trade and tran

government. Japan, South Korea and Taiwan achieved success withou

following those policies. The most important criteria for ODA are those

necessary for a developmental state: a strong and economically knowledg

leader; a supporting cadre of expert technocrats; a centralized but flexible

decision-making system, and an ideolog

e national goal (Ohno 2003a).

In the Japanese view, a strong, centralized government is critical in the

early stages of industrialization because a nation’s resources must be mobilized

into a few channels to catalyze growth. The authoritarian developmental sta

not ideal but it is not permanent, either. It typically emerges under extern

threat; often through a military coup or military backed rulers. It derives

legitimacy not from law but from successful economic growth. It lasts a few

13

decades until it is undone by its own success and the nation moves on to a

wealthier and more democratic trajectory.

Japanese policy analysts acknowledge that the flying geese model must

be amended to fit the new era of global integration. Japan, Korea and Taiwan

protected their fledgling industries but this is no longer feasible today becaus

developing country must liberalize trade early on, and because local firm

countries tend to lack sufficient technical capability. But opening fully to the

world economy will not enable catching up. The key question is how to

effectively balance openness and protection in key industries. Japan’s current

advice to developing countries is to maximize FDI inflows; link local enterprises

to FDI firms; and absorb technology, management and marketing skills through

those links. How to craft effective linkages between a globally competitive export

sector dominated by TNCs and a weak and protected domestic sector through

industrial policies on localization, tariffs, industrial estates and the like is a

e a

s in poor

critical

issue; another ries capable

e

aucratic

on

,

is how to effectively promote domestic support indust

of supplying intermediate inputs to the globally competitive export sector.

6. The Thai State: From Bureaucratic Polity to……?

Until recently, the most widely accepted model of the Thai state was th

“bureaucratic polity,” a form of patrimonialism (Riggs 1966). The bure

polity is dominated by a military and civil service elite. Politics equates with

competition among bureaucratic factions for government resources.

Administration is organized through status and patronage relations. Promoti

depends upon deference and loyalty to superiors. Departments are balkanized

14

officials lack accountability, and corruption is pervasive. The bureaucra

strong point rests with its ability to extract resources fro

cy’s

m the population while

ssion. But here,

olitics

llenged military-

sive to

etween

ced in

of office. But the

simultaneously maintaining social order, thus satisfying the day-to-day

organizational needs of military rulers (Painter 2005).

Nonetheless, some segments of Thailand’s bureaucracy possessed

considerable technocratic expertise and a rational-legal outlook on

administration: most notably, officials lodged in the National Economic and

Social Development Board, The Board of Investment, the Bureau of the Budget,

the Bank of Thailand, and the Office of the Civil Service Commi

too, seniority, favoritism and interdepartmental infighting weighed heavily; vision

was lacking, as was debate (Nukul Commission Report 1998).

The bureaucratic polity began to change in the 1970s. Electoral p

extended political opportunities to local community and business influentials.

Student movements and other forms of civic protest cha

bureaucratic hegemony. The state became more pluralistic and respon

the demands of relatively autonomous interest groups.

By the mid 1990’s, the Thai polity had become a parliamentary

democracy. The bureaucracy was now allied with a new class of professional

politicians. The military remained influential through its shared business interests

and social connections with bureaucrats and politicians. Politicians represented

many small political parties. Political parties, based upon local alliances b

business and village notables, and upon vote buying money politics, coales

unstable parliamentary majorities to divide up the fruits

15

bureaucracy continued to dominate administration and policy because the

coalition governments were short lived and indecisive.

Thailand created a new constitution in 1997. Supported by the nation

expanding middle class, the document aimed to curb political corruption,

strengthen executive powers, decentralize the bureaucracy, guarantee civil

rights, and encourage local initiative. But Thailand’s financial crisis in 1997, and

the conditions attached by the IMF to its recovery loans, altered Thailand’s

political environment. A nationalist reaction to the crisis, and to the IMF structural

adjustment program, helped propel a new political party, Thai Rak Thai (TRT),

and its leader, Thaksin Shinawatra, into office in 2001, with a near majorit

’s

y of the

he

ng a

along

p

He simultaneously appointed close associates and relatives to

seats. Thaksin and the TRT went on to win two-thirds of the popular vote in t

2005 elections, enabling the party to govern without a coalition partner.

Thaksin set about creating a centralized, politically managed system

responsive to the TRT’s political needs. A self-made business tycoon, Prime

Minister Thaksin modeled the state on a corporate conglomerate led by a strong

central executive. With support from the World Bank, he began implementi

“New Public Management” (NPM) program to restructure the bureaucracy

lines advocated by neoliberal public choice theory, including budgeting for

results, performance management and customer satisfaction. Ostensibly

designed to rationalize the administration, Thaksin actually used the NPM to hel

centralize personal and party control over the bureaucracy and the spoils system

(Painter 2005).

16

key positions in the Prime Minister’s office, civil service, military, police an

commissions.

Thaksin’s efforts to exert party and personal control over the state

provoked the military and bureaucratic elite and his involvement in vote buying

and tax avoidance scandals offended the urban middle class. In September

2006, after a year long political crisis, a military faction disposed Thaksin and the

TRT through a coup. It was the twenty-third attempted military coup since

Thailand became a constitutional monarchy in 1932, and the twelfth to meet with

success (Fry 2007). The junta promptly banned all political activity and brought

back rule by bureaucrats. The September 2006 coup indicated that Thailand had

yet to institutionalize a set of rules that key political actors were willing to obey,

even when frustrated, instead of turnin

d policy

g to the use of force to achieve their aims

a new constitution and has scheduled a

del

associated

9-

(Chang Noi 2007a). Thailand is drafting

national election at the end of 2007.

Thailand’s Weak Developmental State

Compared to the five criteria laid out in Chalmers Johnson’s ideal type,

Thailand has a weak developmental state.

(1) The stable political rule called for by the developmental state mo

has been lacking in Thailand, and the commitment of the Thai political elite to

developmentalist ideology has been episodic. Shimomura (2006: 25) has

identified two main periods of developmentalism in Thailand, each

with the administration of a Prime Minister: Sarit (1957-1967), and Prem (197

1990). Both phases are characterized by a political leader who is

17

knowledgeable about development; who values technocratic expertise; who

sends government officials overseas for training; who attempts to insulate

technocrats from political pressures; whose development projects are guided by

, and

was

techno

o

ore

strialization with

en

economic rationality as well as patronage; and who is able to sustain a balance

among multiple competing political interests.

General Sarit came to power in a coup d’etat, abolished Parliament and

the constitution, outlawed existing political parties, founded one of his own

established a highly authoritarian regime. The Sarit administration established

the National Economic and Social Development Board and implemented

Thailand’s first five year plan. Prime Minister Prem, also a military leader,

elected to power by the National Assembly. Prem strengthened the role of

crats in government, and forged the alliance between the state and

business groups that initiated Thailand’s export industrialization strategy.

The Thaksin administration (2001-2006) was too eclectic and turbulent t

be characterized as developmentalist. But the Prime Minister did institute a m

centralized and results oriented administration. He refined and expanded the

state’s industrial policy making apparatus. And he implemented a new “dual

track” growth strategy that combined FDI driven export indu

domestic programs to help local communities identify and utilize indigenous

resources to create new small businesses (Looney 2003).

(2) The Thai state has a cadre of expert technocrats, as called for in the

developmental state model, but much of the bureaucracy still operates according

to patron-client principles. And the technocratic stratum itself is divided betwe

18

officials adhering to developmental and to neoliberal ideologies. These divisions

often correspond to differences in overseas training and help to explain why,

even when developmentalist ideology was ascendant, the Thai government

continu state

h

, social welfare and environmental conservation, and offer a general

vision

raft

s

ent, the private sector and professional

ed to liberalize trade and finace, ease capital controls, and privatize

enterprises.20

(3) Thailand has a national planning agency and a relatively robust

industrial policy making apparatus, anchored in public/private cooperation, whic

corresponds with the developmental state model (Ohno 2005). The National

Economic and Social Development Board (NESDB) drafts Thailand’s national

Five-Year plans. The plans address broad socio-economic themes, like human

resources

of Thailand’s future trajectory, but without specifying implications for the

budget.

Industrial policy-making is lodged in Industry-specific committees and

Institutes that bring together the relevant Ministries, private sector firms and

officials from the Prime Minister’s office. The Committees meet regularly to d

and implement industrial policies. Government officials and the top managers of

private firms design policies together and they create and implement action

plans. Subcommittees address new issues as they arise. The Committee

enable information exchange between government and business and they

operate by consensus. Industry-specific Institutes exist for nine industrial

sectors, including automotive, electronics, textiles and steel. These Institutes

coordinate relations among governm

19

expert ing,

et

es

orld

nd

pan

o 2005).

s. The Institutes provide supporting services, such as training and test

and they engage in policy research.

Each industry sector has a master plan, developed jointly by Ministry

officials and business executives. AAT’s top management, for example, has

participated in developing Thailand’s master plan for the automotive industry.

The Ministry of Industry (MOI) provides the auto sector with policy concerns and

measurement criteria and the auto firms provide the Ministry officials with mark

information and targets. The Thailand Automotive Institute (TAI) coordinates the

exchange of information and the drafting process. The master plan analyz

Thailand’s domestic motor vehicle market and the country’s position in the w

industry. It poses national goals and provides a vision (e.g. becoming the

“Detroit of Asia”) and objectives, including numerical targets for production,

exports and localization. It discusses various kinds of strategies (e.g. human

resource development, market expansion through Free Trade Agreements,

industry clusters, supply chain organization) and gives detailed action plans to

achieve the national goals. The draft is submitted to both the private sector a

the Thai Ministry of Industry, the official author of the master plan. The private

sector adds explanatory material and the MOI submits the final report to the

government and to the Prime Minister. The private sector, government and TAI

continue to cooperate in implementing, monitoring and adjusting the plan. Ja

designs master plans and industrial policies in much the same way (Ohn

(4) Thailand, contrary to the developmental state model, has failed to

mount a sustained public investment program in secondary and tertiary

20

education. The educational attainment of the Thai labor force is very low

comparison to other countries in the region, and the drop out rate is very hi

in

gh

nt in

s

n

nomy and small proprietors; between

primat

(Phongpaichit and Sarntisart 2000: 32-33). Thailand’s small number of

secondary school graduates is a major road block to industry upgrading.

Likewise, contrary to the developmental state paradigm, Thailand’s

distribution of returns from economic growth has been far from equitable.

Poverty has dropped considerably, from 57 percent in 1962, to 11 perce

2004, but inequality continues to rise (UNDP 2007: 22-24). Thailand is estimated

to have the fifth worst income distribution among developing countries

(Phongpaichit and Sarntisart 2000: 1). Rising income inequality reflects division

between a small stratum of highly educated workers, often employed by foreig

firms, and the rest of the labor force; between the family based conglomerates

that dominate the domestic service eco

e city Bangkok and the countryside;, and between regions (Kubo 2006;

Phongpaichit and Baker, July 2007).21

(5) The Thai government, in accord with the developmental state model,

intervenes in the economy primarily through the use of market incentives. The

Eastern Seaboard Industrial Estate exemplifies that kind of intervention. ESIE is

one of 34 industrial estates spread over 15 provinces. The industrial estates are

developed and managed by the Industrial Estate Authority of Thailand, a state

enterprise under the authority of the Ministry of Industry. The IEAT is charted to

implement the government’s industrial development policy, primarily by providing

all of the infrastructure needed for industrial operations. The Thai government’s

21

investment promotion authority, the Board of Investment (BOI), also provides tax

and tariff incentives to entice investments into the estates, with higher incentives

central Bangkok in an effort to decentralize

Thailan

xtiles,

h the aid of the industrial estate program, and in line

with lo

s

. The

provided to estates more distant from

d’s industrial base and blunt uneven regional development (BOI 2007).

From Mass to Niche Industrialization

Thailand is attempting to shift its export industrialization strategy away

from conventional mass production toward industries in which the nation has

special strengths. Through a process of local differentiation and individuation,

the government hopes to find global market niches that can generate high value

added returns (METI 2004). The five target industries are motor vehicles (single

ton trucks and auto parts); agro-industry (Thai speciality foods); fashion (te

jewelry, leather); high value added services (healthcare, spas and tourism); and

software (graphic design). The strategy also involves clustering the niche

industries geographically, wit

cal strengths, so as to spread industrial development more evenly among

regions (Sasin News 2003).

The shift in emphasis from mass production based upon low cost factor

of production to flexible specialization based upon local comparative strengths is

driven by several factors. Internationally, the new strategy reflects Thailand’s

growing integration with the world economy, and especially with China. Thailand

can’t compete with China’s capital and labor reserves for mass production

industry niche strategy is meant to turn China’s growing power into a source of

demand for Thai goods rather than a competitive threat to Thai industry.

22

Domestically, the change in strategy is a response to the exhaustion of ext

industrialization--economic growth based merely upon adding capital and labo

existing means of production—that is responsible for Thailand’s dec

ensive

r to

lining

productivity rates. The n counteract uneven

ri.

spatial loci for Thailand’s export industrialization strategy, the ES

region has become the nation mic zone after metropolitan

Bangk

he

ds and railways, sewage and

water t

ral

ew strategy is also meant to help

development between industrial Bangkok and outlying provinces.

7. The Eastern Seaboard Region

ESIE and AAT are located in Rayong, one of 3 provinces that compose

the Eastern Seaboard Region; the other two are Chachoengsao and Chon Bu

The three provinces lie immediately south and east of central Bangkok (See Map

1). As the

’s second largest econo

ok.

[Map 1 About Here]

Eastern Seaboard development became a priority during the Prem

administration (1979-1990). The shift from import substitution to export

industrialization required huge investments in supporting infrastructure.22 T

Fifth National Plan (1982-1986) called for new roa

reatment plants, power generation facilities, 2 deep water seaports,

industrial estates and export processing zones.

Heretofore, industry had concentrated almost exclusively in the cent

Bangkok area. The ES development plan aimed to build the new infrastructure

Thailand needed while simultaneously reducing population concentration,

congestion and pollution in metropolitan Bangkok by spreading industrialization

23

into adjacent southeastern provinces. Nearly $40 billion in foreign direct

investment has flowed into the Eastern Seaboard region since the inception of

the regional plan, 460,000 jobs have been created, and an 150 km urban

from central Bangkok along the Gulf of Thailand

to Ray

rdinated

the

ith

l Economic and Social Development Board, the Thai planning

authority responsible for the re rogram (Ariga and Ejima

2000:

s first

industrial corridor now extends

ong Province (Ariga and Ejima 2000: 108).23

Japan versus the World Bank

The Eastern Seaboard development program was initiated by the Thai

state but the Japanese government made it financially feasible and coo

its execution. The regional program featured 16 separate infrastructure projects

(railways, highways, ports, water pipelines, reservoirs, heavy industry

complexes), each an integral part of one grand design (See Map 2). The Japan

International Cooperation Agency (JICA) led the planning effort and provided

various kinds of technical assistance over the 20 years it took to complete

development. And the Japanese government financed all 16 projects, virtually

the entire infrastructure scheme, via low interest loans from its Overseas

Economic Cooperation Fund. The JICA coordinated project implementation w

the Nationa

gional development p

84).

[Map 2 About Here]

The World Bank opposed the ES development scheme when it wa

laid out by the Thai government in the early 1980s. Focusing on the proposed

construction of two deep water seaports, the Bank argued that the Thai

24

macroeconomic situation (sluggish exports, rise in deficits, low foreign currency

reserves) was too unstable, the demand for cargo transport in the proposed por

was insufficient, the estimated profitability relative to interest on capital was too

low, and the expectations for employment gains

ts

and industrial decentralization

were to onal

alued

Gulf

-1986) and Sixth

re

export of

o unrealistic to justify the massive capital outlays called for in the regi

development plan (Shimomura 2006: 28-29).

Japanese aid agencies supported the regional development scheme

arguing that the World Bank’s short-term fiscal and financial view underv

the long-term industrial and export significance of container transport in the

of Thailand, and the Bank didn’t sufficiently appreciate the role of public

investment in generating private investment and comparative advantage.

Thailand decided to go ahead with the ES development program in 1986 with

Japanese assistance. As a consequence, the World Bank’s share of Thailand’s

external borrowing fell by half between Thailand’s Fifth (1982

(1987-1991) National Development Plans, from 21.6% to 10.3%, while Japan’s

share doubled from 19.0% to 41.7% (Shimomura 2006: 16).

Japan’s support for Thailand’s Eastern Seaboard development program is

a paradigmatic example of Japan’s strategic, flying geese, regional outlook.

Eastern Seaboard infrastructure would facilitate the transfer of lower value, less

competitive segments of Japanese manufacturing into Southeast Asia, whe

cost conditions would enable the continued production and competitive

those goods. For Thailand, Japan’s financial and technical assistance for

regional infrastructure, and the ensuing FDI flowing into manufacturing

25

transplants, often in joint ventures with Thai companies, was a means to upgrade

the nation’s industrial base. Unforeseen at the outset of the regional plan, the

escalation in value of the Japanese yen after the 1985 Plaza Accord would turn

the stream of Japanese capital flowing into Southeast Asia into a torrent. And

Thailand would become a platform for the renewed export of Japanese products,

now too expensive with the strong yen to be produced com

petitively in Japan,

into the U.S. ma to prevent by

ten. These companies have invested nearly US$ 3.5 billion in the

estate, they employ over 25,0 they export products to 130

countr

ercial

ost office, customs house, hospital, banks, restaurants, convenience

rket, the very thing the U.S. government was trying

pressuring Japan into the Plaza Accord in the first place.

8. The Eastern Seaboard Industrial Estate (ESIE)

The Eastern Seaboard Industrial Estate (ESIE) is located in Rayong

Province, approximately 120 km southeast of central Bangkok (see Map 3). Self

styled as the “Detroit of Asia,” the ESIE houses 165 multinational companies

spread over 3200 acres; more than 100 are auto suppliers, including nine of the

world’s top

00 workers there, and

ies.

[Map 3 About Here]

The ESIE, like the 33 other industrial estates managed by the Industrial

Estate Authority of Thailand, resembles an industrial town. It has the complete

infrastructure needed for industrial operations, such as electricity, water supply,

environmental controls and public utilities. It is close to air-and-seaports for the

transshipment of goods. It contains a wide range of government and comm

services: p

26

stores,

direct

plant, including all of the

require

le, the

itself as a broker and a forum for the exchange of information

among

other

n

r

ent regulations. A safety club meets to

travel agencies, accounting and consulting firms, and international

schools.

Thailand’s industrial estates compete with one another for foreign

investment but under national guidance and monitoring. The investment

incentives they can use, and the rules for allocating incentives, are also

determined by the central government.24 The estate provides a “one stop”

service to assist a company wishing to establish a

d permits, and help in securing government subsidies, bank loans, and

building design (Wilbur Smith Associates 1998).

ESIE was built by a private company, Hermarj Land and Development,

Inc. The Hermarj Corporation jointly manages the estate with the Industrial

Estate Authority of Thailand, a public enterprise.25 In its management ro

company sees

companies in the estate and between estate companies and the

government.

ESIE, under Hermaj guidance, serves as a kind of incubator for discerning

and setting market and regulatory standards. Estate companies visit one an

to learn about each other’s facilities, they exchange information on compensatio

and on training programs. Management consultants also do compensation

surveys of estate companies and Hermaj circulates the information. The estate

has a regional training center and a human resource club that focuses on labo

market characteristics and new employm

27

work o

e’s

utility

j monitors the

environ

.

ded

e

ndent

led

anded demand for local

ut responses to theft, fire and factory spillage. Another club discusses

changes in government regulations.26

The estate office brings government and company officials together to

discuss upgrades in infrastructure, engineering, and environmental standards.

AAT was the first company to locate in ESIE and participated in the estat

conceptualization and design. At AAT’s request, ESIE’s infrastructure and

systems were built to meet ISO 14001 guidelines. Hermar

ment practices of companies in the estate and performs a monthly

environmental audit on air, water, and hazardous waste.

Companies like Hermarj Corporation design and manage Thailand’s

industrial estates in cooperation with the Industrial Estate Authority of Thailand

But Hermarj and the IEAT also depend upon provincial growth machines, hea

by political bosses, to overcome local resistance to the estate projects, to free

land for development, to construct the estate’s infrastructure, and to provid

services to the estate. Business success in a patrimonial society is depe

upon political connections and patronage, and Thailand’s provincial boss

systems are based upon personal ties among village notables and local

capitalists (Nishizaki 2002:16). The enormous infrastructure investments cal

for by the Eastern Seaboard development plan considerably expanded the

wealth and power of provincial political bosses whose growth machines are

involved in the real estate deals, the construction contracts, the transport

services, the hotel and restaurant operations, and the exp

28

agriculture products, minerals and raw materials—wealth making opportun

heretofore monopolized by Bangkok (Shatkin 2004: 18).

Ironically, the democratic extension of political opportunities to the

provinces, while weakening the Bangkok centered national elite, has extended

the power of boss led political machines, thus reinforcing if not accentuating

role of patron-client relations in Thai society. This is not the outcome anticipated

by the neoliberal “enablement model,” impressed upon Thailand and other

developing countries, by the World Bank and the United Nations. That scheme

holds that governments, for reasons of efficiency, should decentralize and

deregul

ities

the

ate so as to “enable” capable private firms, voluntary associations, and

community organizati rvices (Shatkin

2007).

AAT

search on Automotive Alliance Thailand, reframed to

cal

nual

and foreign markets.27 The company employs 2700 workers at two shift

ons to build infrastructure and deliver se

9. Automotive Alliance Thailand (AAT)

We have looked at the nested policy relationships in which ESIE and

are embedded, focusing on the influence of neoliberalism and developmentalism

at different institutional and geographical scales. Here we present capsule

findings from our earlier re

reveal the interplay between neoliberalism and developmentalism at the lo

production system level.

AAT, ESIE’s first and signature tenant, is an alliance between two

transnational motor vehicle companies, Ford and Mazda. AAT has an an

production capacity of 140,000 one-ton pick up trucks, targeted to both domestic

29

capacity, is about 80 percent of whom are Thai, and purchases components from

approximately 100 local suppliers. Ford and Mazda have equal investment in the

t

s in

countries to gain access to local markets,

ort of hybridization (Abo,

company and equal representation on the Board of Directors.

The structure of the world automobile industry is evolving into multi-level

global networks in which automakers of various sizes with different product mixes

form a variety of joint operations. Companies are trying to increase their produc

variety so as to stimulate demand in saturated markets in developed countries

and meet the requirements of growing markets in developing countries. Firm

an alliance network can diversify their product offerings while reducing their

investment costs by combining complementary product lines and matching up

different organizational and production capabilities. Corporations headquartered

in nations with different market rationalities are allying with one another, and they

are setting up joint operations in third

resources, and platforms for export.

Corporations express the national institutions and social circumstances of

their birthplace (Doremus, et.al. 1998). Foreign direct investment, embodied in

the transnational corporation, infuses the foreign corporation’s political-economic

outlook and practices into the host society. At the same time, the transplanted

production system must accommodate local institutional imperatives and political

interests. Research on efforts to transplant production systems from one nation

into another suggests the outcome is invariably some s

1994; Boyer, et.al. 1998; Ernst and Ravenhill, 2000).

30

Hall and Soskice (2001) identify two categories of capitalism: liberal

market economies (LME) characterized by neo-liberal policies and coordin

market economies (CME) in which social and political institutions directly shap

economic activity. The Anglophone countries, with the USA as the prime

example, fall under the LME heading. The CME category is occupied by non-

Anglophone countries, with Germany as the exemplar. Hall and Soskice further

distinguish between two types of CMEs: one with “industry-based” coordinatio

of the German type and another with “group-based” coordination like that found

in Japan and South Korea (also see Soskice 1999). We will refer to the latter

group based, East Asian

ated

e

n

type of CME as developmentalist because it is rooted in

o

hand,

ls

r adaptive innovation, and they

a state guided effort to mobilize capital and labor to catch-up with economically

more advanced nations.

According to Hall and Soskice, in the ideal typical LME, labor markets set

wages through pure competition with little social protection for employees or

investment in employee skills. Subcontracting relations among firms are equally

competitive and disposable. The primary LME goal is maximizing shareholder

value. The emphasis on shareholder value facilitates rapid shifting of capital t

new and more profitable firms and product areas. CME’s, on the other

engage in corporatist wage-setting, and they closely regulate labor markets.

Supplier relationships are longer term, more informal and trust based.

Corporations tend to look to banks for long term financing. Management contro

the enterprise. CME’s are strong at incremental o

31

are distinguished from LMEs by the capacity to make long term decisions t

maximize collective rather than individual aims.

AAT can be viewed as a meeting ground between the two types of

hat

r

ting, labor market orientation, and work organization—are organized

by Mazda in Japan, Ford in azda Alliance, AAT, in

n

les. The overall

empha

production systems: Ford’s organization is rooted in the American LME

experience; Mazda’s expresses Japan’s developmentalist CME trajectory.

What, then, is the mix and relative weight of neoliberalism and developmentalism

in the AAT production system in Thailand? Tables 2-4 provide a partial answer

to that question. Drawing upon our earlier research, we put together summary

findings showing how three salient components of a production system—supplie

subcontrac

the USA, and by the Ford/M

Thailand.

[Tables 2-4 About Here]

Table 2 compares company supplier relations in the three different

settings. 28 Mazda’s supplier system in Japan is based upon collaborative

manufacturing.29 The overall emphasis is on long term, close, informal, highly

synchronized and customized, subcontracting relations between parent company

and supplier firms organized in a family like keiretsu grouping.30 The America

supplier system is based upon competitive manufacturing princip

sis is on short term, formal, contractual, disposable, and standardized

purchasing relationships between parent and supplier firms.31

AAT has adopted some of the supplier principles Mazda uses in Japan,

most notably just-in-time delivery and supplier associations (albeit much weaker

32

in Thailand than in Japan), and it mixes together Japanese style informal and

American style formal methods of control.32 However, the AAT supplier system

is heavily weighted toward neoliberal practices as epitomized by its adoption of

,

of

n the job.34 The income gap between management and employees is

rise

pany

ap between

Ford’s competitive, global sourcing policy to purchase “the best quality at lowest

price from any firm anywhere in the world.”33

Table 3 compares labor market orientation in the three contexts. Mazda

in Japan emphasizes internal labor market principles to secure the long term

commitment of employees, to protect company investments in employee skills

and to retain accumulated employee knowledge, which it considers to be one

the company’s most important assets. Mazda offers life time employment to

regular employees; bases wages on seniority and bonuses tied to company

performance, as well as on merit; invests heavily in employee skills; and trains

mainly o

small. Employees, office staff as well as factory workers, belong to an enterp

union.

Ford in the USA emphasizes external labor market principles to gain

flexibility in the hiring and firing of employees in response to changing

circumstances. Ford does not offer long term employment commitments,

seniority wages, or bonuses based on company performance.35 The com

invests little in worker skills, and trains largely through standardized manuals.

Turnover is high and not viewed as a problem. The income g

management and regular employees is very large. The company’s blue collar

workers and some office staff belong to an industrial union.

33

As with the supplier system, AAT’s labor market orientation is a mix of

American LME and Japanese CME characteristics but in this case the balance

falls heavily in the CME direction. Like Mazda in Japan, AAT offers long term

employment, gives employees bonuses for company performance, and invests

heavily in worker training. But, like Ford in the USA, the company does not us

seniority in its wage calculations, and the pay gap between factory operativ

and management is high, a function of the shortage of highly educated Thais

available for managerial positions. AAT combines on the job training with

manuals. ATT workers are not represented by an industrial union (industr

unions are not allowed under Thai labor law) nor by an enterprise union (which

Thai law does allow) but through a joint Labor-Management Consultation

Committee. The Thai government has used AAT’s consultation committee

model for labor legislation a

e

es

ial

as a

nd now requires all Thai companies with 50 or more

w

There d to

.

employees to have a joint Labor-Management “Welfare Committee” (Thai

Labour Campaign, n.d.). 36

Table 4 compares work organization in the three settings. Mazda in

Japan emphasizes employee orientation to the worksite, as a means to mobilize

employees, irrespective of position and rank, to do what is necessary for the

success of the company, viewed as a community of fate. Staff work in full vie

of one another in open office layouts. Workers engage in many small group

activities. There is a suggestion system to improve company performance.

are few job classifications. Workers rotate among jobs and are traine

perform many kinds of tasks. Uniforms are worn as a badge of company identity

34

Ford in the USA emphasizes employee orientation to the job not the

worksite, and the company is perhaps best described as a community of limited

liability. Offices are partitioned for individual privacy. Small group activities

suggestion systems are not the norm. Workers have singular skills and c

in one specialized position through a lifetime of work. The labor process

and

an stay

is

subdiv

p

T

job

er than Ford in the

USA.

ts

d

the distinction between finance as a vehicle for neoliberalism on the one hand,

ided into many job classifications. Workers do not wear company

uniforms, which are viewed unfavorably as masking personal identity.

AAT mixes the two forms of work organization in intriguing ways. The

finance and sales office, managed by Americans and Europeans from Ford, is

partitioned into private spaces; the manufacturing operations office, managed by

Japanese from Mazda, is an open space. Managers and workers on the sho

floor wear AAT uniforms. Office staff can choose to wear a uniform or not. AA

has small group activities, job rotation, and multi-skilling. The number of

classifications is larger than at Mazda in Japan but far few

Taken as a whole, AAT’s work organization bears a much closer

resemblance to Mazda in Japan than to Ford in the USA.

In summary, AAT combines Ford’s LME, “pure market,” global sourcing

policy in supplier relations with Mazda’s CME internal labor market and worksite

orientation. This blend of neoliberal and developmental practices at AAT reflec

the division of labor Ford and Mazda have established between themselves in

their alliance operations world wide. Ford is primarily responsible for finance,

administration and sales. Mazda is primarily responsible for manufacturing. An

35

and industry as the force behind developmentalism on the other, runs through

the policy relationships examined at every institutional and geographical scale in

this study.

eralism

e nation’s export

industr

s

onditions and the structural

adjustm

s

y

t

ery deeply into Thailand’s

domes

10. Conclusion

What conclusions can we draw about the interplay between neolib

and developmentalism in Thailand from our study of th

ialization and regional development policies?

Global neoliberalism. The Washington Consensus institutions--the IMF,

the World Bank and the WTO--in partnership with a fiscally conservative, often

American trained segment of the Thai bureaucracy, have been the main force

behind neoliberalization in Thailand. The Thai state has steadily lowered its

barriers to trade, finance and direct foreign investment. And the government ha

cut spending, opened its exchange rates to market competition, and privatized

some state enterprises in conformity with IMF loan c

ent policies advocated by the World Bank.

Thailand’s export industrialization strategy and Eastern Seaboard

development program depend upon foreign direct investment and ready acces

to international markets. In this respect, the openness to the world econom

called for by neoliberalism is an integral feature of Thailand’s developmen

outlook. But neoliberalism hasn’t penetrated v

tic political and economic institutions.

Global neoliberalism grew out of the breakdown of the international

monetary regime in the 1970s. It is driven today by the unfettered cross border

36

flow of money capital, and by the corresponding power shift from public to

finance, from commercial banks to institutional investors, from corporate

management to shareholders, and from investors with long term growth horizons

to speculators after short term returns. This shift in the balance of power from

industrialist to financier is clearly important, but one shouldn’t assume that the

trader in assets has somehow triumphed over the long term producer (Bello

3). That assumption would be particularly problematic in East Asia where

developmentalist ideology has been strong, and in late develop

private

2007

ing countries, like

Thailan

been a

of

ic

ising and research arms, like the Japan

d, that are in the midst of the struggle to industrialize.

Regional developmentalism. Japanese developmentalism has

competitor, a countervailing force, and an alternative model to global

neoliberalism in East Asia. Japan emphasizes policy areas underplayed if not

ignored by neoliberalism but of crucial significance to economic development in

late industrializing nations: manufacturing, sectoral industrial policies, and long

term economic planning. Japan has long had a strategic, “V formation” vision

the East Asia region, in which it occupies a leadership role, and the Japanese

state promotes the developmentalist ideology through a variety of mechanisms,

including its foreign assistance and loan programs, like the Overseas Econom

Cooperation Fund, and its policy adv

International Cooperation Agency.

Japan’s developmental influence in Thailand can be seen in the Thai

state’s industrial policy making apparatus. It can also be seen in the planning,

financing and execution of the Eastern Seaboard regional development program,

37

where Japan’s emphasis on long term industrial growth and created comparativ

advantage clashed with and won out over the World Bank’s short ter

e

m, fiscally

5),

in

ix can be

ith

ne

conservative and static comparative advantage view.37

Thailand’s market access regime. Thailand mixes neoliberal and

developmentalist elements in different ways at different institutional and

geographical scales. At the global-national interface, Thailand functions as a

“market access regime.” As characterized by Cowhey and Aronson (1993: 4

market access regimes combine openness to international competition and

foreign penetration with government efforts to promote industrial advantage

through supporting public infrastructure, assisting industries to restructure

response to foreign competition, targeting new industries, and promoting

research and development. At the local production system level, the m

seen in AAT’s combination of neoliberal subcontracting relations w

developmentalist internal labor markets and work site orientation.

Context is everything. A policy may look the same in two locales but

mean something entirely different in each due to differences in institutional

setting. In the Western context, Thailand’s industrial estate system could be

interpreted as an instance of neoliberal restructuring because the estate policy

replaces an earlier, more centralized approach to regional development, and

because local industrial estates use economic incentives to compete against o

another for foreign direct investment (Brenner and Theodore 2002:371). But

Thailand’s industrial estate system is actually an instance of developmentalism

38

becaus

ent

the

t, The Hermarj

Corpor

l

y

n-

s a relatively mild

form o ift from

e it is part of a national industrial policy, and because the local estates

compete with the same package of nationally determined incentives.38

Likewise, at the estate management level, the Hermarj Land Developm

Corporation, a kind of public/private partnership, could be interpreted in

Western context as a neoliberal instance of the state diffusing power to local

capital (Hackworth 2007: ch. 4). But in the Thai contex

ation appears to function more like an “arm and a leg” of the state on the

model of Japan’s public corporations (Okimoto 1989).

Thailand’s neo-patrimonial society. The starting point for change is critical

to the interpretation of change. Both neoliberalism and developmentalism are

foreign imports in Thailand. Neither ideology is rooted in Thailand’s own politica

traditions. Both the neoliberal and the developmental state are governed b

rational-legal authority. The Thai state, by contrast, is still dominated by patro

client relations. Western neoliberalism emerged in reaction to Keynesian

liberalism yet both ideologies derive from classical economic liberalism. The

Western shift from Keynesian liberalism to neoliberalism is thu

f regime change by comparison to the system transformation a sh

neo-patrimonialism to neoliberalism in Thailand would entail.

Thailand’s neo-patrimonial context also alters the meaning and

implications of what might otherwise appear to be steps in the neoliberal

direction. For example, political decentralization in Thailand, rather than

promoting local government efficiency and accountability, as assumed by

neoliberal public choice theory and the enablement model, has actually

39

increased the power of political machines run by local bosses and reinforced th

centrality of the spoils system in Thai political life (Shatkin 2004) Similarly

Minister Thaksin’s use of the New Public Management program to reform t

bureaucracy was less about increasing transparency, accountability and

efficiency than it was abou

e

, Prime

he

t concentrating power in the executive so as to

consol

any in

is

to

5). The Washington

Conse

t

idate party and personal control over the political-bureaucratic spoils

system (Painter 2005).

What comes next? Neoliberalism is at its lowest ebb in Thailand since the

global political project first emerged in the 1970s. The IMF has never recovered

the credibility it lost during the Asian financial turmoil. Before the crisis, m

the Thai elite believed the nation’s economy should be relatively open. Business

leaders wanted access to technology and capital. Technocrats thought

openness would help break down domestic monopolies. But the financial cris

put Washington Consensus policies into question, even by the World Bank

(Stiglitz 2003). Malaysia weathered the crisis by ignoring IMF orthodoxy and

instituting capital controls. The Asian financial crisis appeared in retrospect not to

be the result of too much government but too little, and especially a failure

regulate financial markets. The IMF now faces its own budget crisis brought on

by a boycott from its largest borrowers (Weisbrot 200

nsus isn’t dead yet but its power to shape economic policy in developing

countries has been greatly reduced (Rodrik 2002).

East Asian developmentalism has also reached an impasse. Singapore

apart, no Southeast Asian country has managed to internalize the managemen

40

skills and technical knowledge required to make high value added goods and

wrest industry control from foreign TNCs. Governments are attempting to do

more to improve local capability. But the aggressive national protection of in

industries that helped Japan, South Korea and Taiwa

fant

n catch up is no longer

permit

del

alf

mainly

he most powerful Thai business

groups

iddle

ted by the international trade regime, and in any case, is much more

difficult to manage in today’s more globalized world.

Pasuk Phongpaichit (2005), one of Thailand’s most astute political

economists, argues that the economic basis for the “developing country” mo

has disappeared. Thailand, she says, is in a “post-development era.” After h

a century of economic growth, Thailand’s organized working class is much

smaller, the nation’s peasantry and informal sector are much larger, and the

middle class is more internationally focused than one would expect from the

experience of Western countries and Japan, Korea and Taiwan. TNCs control

nearly all of Thailand’s export manufacturing, half of the country’s financial

system and much of it high end urban commerce. Thai manufacturers do

lower value subcontracting work for TNC’s.39 T

are concentrated in domestic service industries, like real estate,

construction, and the communications media.

Thailand’s latest 5 year national development plan tilts away from both

neoliberalism and developmentalism toward a communitarian “sufficiency

economy.” An inward looking strategy, the sufficiency economy stresses grass

roots self-reliance, stronger ties among domestic economic firms, and the needs

of Thailand’s deprived rural masses. “Sufficiency” conveys the idea of a m

41

path between deprivation and excess, and is based upon the Buddhist injunct

to avoid extremes. The model touts new ideas for self-sufficiency in rural

villages—rice banks, cattle cooperatives, micro-saving schemes, community

forest projects--and attempts to generalize the underlying principles to the

national economy. Self reliance is the best protection

ion

against external shocks.

Development unfolds incrementally. Dynamism comes from the inside. Thailand

07: 29). must “go back a bit to go forward” (THDR 20

42

Table 1: Net flows of Foreign Direct Investment in Thailand by largest Investor Countries, 1970-1995; 1996-2000. 1970-2000 199 000 6-2

Millions US$ %Share Millions US$ %Share

apan 5334 30.1 4714 27.1

nited States 3000 17.0 3751 21.5

uropean Union 1884 10.6 3318 19.1

ong Kong 2893 16.3 1620 9.3

ingapore 1849 10.4 1982 11.4

J U E H S

aiwan 1070 6.0 658 3.8 T

ource: Bank of Thailand. Adapted from Brimble (2002: Table 3.3)

S

43

Map 1: Thailand and Provinces Thailand Provinces

44

Map 2: Japanese Overseas Development Assistance Projects in Thailand’s Eastern Seaboard Development Program.

Source: Ariga and Ejima (2000).

45

Map 3: Thailand’s Eastern Seaboard Industrial Estate.

46

Table 2: Supplier Relations at Mazda in Japan, Ford in the USA & AAT in

____________________________________________________________

apan USA Thailand

election preliminary assessment standards standards

lations relational contractual contractual

ssociations Yes No Yes, weak

ethods Relational contractual a mix of both

ale, esign small lots, customized standardized a mix of both

engineering engineering engineering

JIT no JIT

ds

________________________________________________________________

Thailand _

Coordinated Market Liberal Market Economy Economy AAT

J Supplier via small orders first, global global s Technical & financial Long-term short-term short term re Supplier A Control Informal, formal M Parts specialized parts, economy of sc d

concurrent independent independent

Delivery Just-in-Time (JIT) Stock piling, Overal l close, informal, formal, disposable standaremphasis relational contracting, relations, standards based collaborative based competition competition

47

Table 3: Labor Market Orientation at Mazda in Japan, Ford in the USA & AAT in Thailand _____________________________________________________________

Coordinated Liberal Market Economy Market Economy AAT Japan USA Thailand

Long term employment Yes No Yes

Seniority wage Yes No No

Bonus for company Yes No Yes performance

Merit pay Yes Yes Yes

Manager/operator pay gap Low High High

Training Type On the Job Manuals Both Investment High Low High

Temporary workers Yes Yes Yes

Labor None union Enterprise Industrial Joint Consultation

Overall Internal labor External labor emphasis market market Mix _______________________________________________________________

48

Table 4: Work Organization at Mazda in Japan, Ford in the USA & AAT in Thailand ______________________________________________________________

Coordinated Liberal Market Economy Market Economy AAT Japan USA Thailand

Office layout open partitioned open & partitioned

Small group Yes No Yes activities

Suggestion system Yes No Yes

Job rotation, multi-skilling Yes No Yes

Job classifications Few Many In between

Uniform Yes No Yes on shop floor, choice in office

Overall Worksite Job emphasis orientation orientation Mix _______________________________________________________________

49

References Abo, Tetsuo (1994) Hybrid Factory. NY: Oxford University Press. Ahern, Raymond J. and Wayne M. Morrison (2005) U.S.-Thailand Free Trade Agreement Negotiations, CRS Report for Congress, Congressional Research Service, Library of Congress, Washington, D.C., November 3. Amsden, Alice (1989) Asia’s Next Giant. NY: Oxford University Press. Arnold, Wayne (2005) “International Business; In a World of Car Builders, Thailand Relies Heavily on a Pickup,” New York Times ,June 16. Association of Southeast Asia Nations (ASEAN) (2006) ASEAN Industrial Cooperation Scheme. <http://www.aseansec.org/6386.htm> Ariga, Kenichi and Shinya Ejima (2000) “Post-Evaluation for ODA Loan Project— Kingdom of Thailand “Overall Impact of Eastern Seaboard Development Program,” JBIC Review, No. 2, November, pp. 81-115. Beeson, Mark (2007) “Competing Capitalisms and Neoliberalism: The Dynamics of, and Limits to, Economic Reform in the Asia-Pacific,” In Kim England and Kevin Ward (eds.), Neoliberalism: States, Networks, People. Blackwell Publishers, Oxford. Bello, Walden (2007) “All Fall Down: The Asian Financial Crisis, Neoliberalism and Economic Miracles,” Japan Focus, 1 August. Boyer, Robert, Elsie Charron, Ulrich Jurgens, and Steven Toliday (Eds) (1998). Between Imitation and Innovation. Oxford: Oxford University Press. Brenner, Neil and Theodore, Nik (2002) “Cities and the Geographies of ‘Actually Existing Neoliberalism’”, Antipode, volume 34, number 3, June, pp. 349- 379. Brimble, Peter (2002) Foreign Direct Investment Performance and Attraction: The Case of Thailand, The Brooker Group, PLC, Hanoi, August. Brown, Wendy (2006) “American Nightmare: Neoliberalism, Neoconservatism, and De-Democratization,” Political Theory, volume 34, pp. 690-714. Chang, Noi (2007a) “Thailand’s Lost Decade,” The Nation 14 May 2007. < http://www.geocities.com/changnoi2/lostdecade.htm?200719> Chang, Noi (2007b) “Ten Years After,” The Nation 12 June. http://www.geocities.com/changnoi2/tenyears.htm?200715

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Cowhey, Peter F. and Jonathan Aronson (1993) Managing the World Economy: The Consequences of Corporate Alliances. NY: Council on Foreign Relations. Doner, Richard (1991) Driving a Bargain: Automobile Industrialization and Japanese Firms in Southeast Asia. Berkeley: University of California Press. Doremus, P.M., Keller, W., Pauly, L. and Reich, S. (1998) The Myth of the Global Corporation. Princeton, N.J.: Princeton University Press. Ernst, Dieter and Ravenhill, John (2000) “Convergence and Diversity: How Globalization Reshapes Asian Production Networks,” pp. 226-256 in M. Borrus, D. Ernst and Haggard, S. Eds. International Production Networks in Asia. NY: Routledge. Gowan, Peter (1999) The Global Gamble: Washington’s Faustian Bid for World Dominance. London: Verso. Gao, Bai (1997) Economic Ideology and Japanese Industrial Policy from 1931 to 1965. Cambridge: Cambridge University Press. Fry, Gerald (2007) “The Military Coup of September 2006,” Harvard International Review, 15 June. <http://hir.harvard.edu/articles/1587/> Fujita, Kuniko and Richard Child Hill (1997) “Auto Industrialization in Southeast Asia: National Strategies and Local Development,” ASEAN Economic Bulletin, volume 13, number 3, March, pp. 312-332. Fujita, Kuniko and Richard Child Hill (2004) “Toyotaism or Wintelism? Hybrid Production Networks and Local Development in Southeast Asia,” Paper presented at the Institute for International Sociology Conference, Beijing, China, July 7-11. Hall, Peter and Soskice, David, eds, (2001) Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press. Hatch, Walter and Kozo Yamamura (1996) Asia in Japan’s Embrace: Building a Regional Production Alliance, NY: Cambridge University Press. Harvey, David (2005) A Brief History of Neoliberalism. Oxford: Oxford University Press.

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Hemarj Land and Development Company (2007) Industrial Estates http://www.hemaraj.com/industrial_eastern_seaboard_industrial_estate.asp Hewison, Kevin (2003) “The Politics of Neo-Liberalism: Class and Capitalism in Contemporary Thailand,” Working Paper Series No. 45, City University of Hong Kong, May. Hill, Richard Child and Fujita, Kuniko (1999) “Global Alliances, Local Hybrids: Ford & Mazda in Thailand,” Paper presented at the ASEAN Inter- University Seminars IV, Prince of Songkla University, Pattani, Thailand, June 16-18. Hill, Richard Child and Fujita, Kuniko (2003) “The Nested City,” Urban Studies, volume 40, number 2, pp. 207-217. Japan Ministry of Economy, Trade and Industry (METI) (2004), “Spreading the Idea of‘New Value Creation Economy: Dual Track Policy in Thailand,” Section 5, pp. 268-276 in White Paper on International Economy and Trade, Tokyo. Jessop, Bob (2002) “Liberalism, Neoliberalism, and Urban Governance: A State- Theoretical Perspective.” Antipode, volume 34, number 3, June: pp. 452- 472. Jetin, Bruno (2007) “Thailand 10 Years After the Crisis: Beyond Finance, the Exhaustion of a Low-Productivity Growth Regime?” Presented at Conference on “A Decade After: Recovery and adjustment Since the Asian Crisis”, Organized by International Development Economics Associates (IDEAS), Bangkok, 12-14, July. Johnson, Chalmers (1987) “Political Institutions and Economic Performance: The Government Business Relationship in Japan, South Korea, and Taiwan,” Pp. 136-164 in Frederick Deyo (Ed.) The Political Economy of the New Asian Industrialism. Ithaca, NY: Cornell University Press. Kubo, Koji (2006) “The Degree of Competition in the Thai Banking Industry before and After the East Asian Crisis,” Discussion Paper No. 6, Institute of Developing Economies. Tokyo. Lecler, Yveline (2002), “The Cluster Role in the Development of the Thai Car Industry,” International Journal of Urban and Regional Research, volume 26.4, December. . Looney, Robert (2003) “Thaksinomics: A New Asian Paradigm?” Strategic Insight, Center for Contemporary Conflict, Monterey CA, December 2.

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Ministry of Economy, Trade and Industry (2004) White Paper on the International Economy and Trade. Tokyo. Nishizaki, Yoshinori (2002) “Provincializing Thai Politics,” Kyoto Review, March. Nopprach, Somsupa (2006) Supplier Selection in the Thai Automotive Industry, Discussion Paper Series No. 186, Institute of Economic Research, Hitotsubashi University, Tokyo, October. Nukul Commission Report (1998) Analysis and Evaluation of Facts Behind Thailand’s Economic Crisis. Bangkok: The Nation Press. Ohno, Kenichi (2003a) East Asian Growth and Japanese Aid Strategy, National Graduate Institute for Policy Studies (GRIPS) Development Forum, 81 pp., Tokyo. http://www.asia2015conference.org/pdfs/East Asia.pdf Ohno, Kenichi (2003b) “The Role of Government in Promoting Industrialization Under Globalization: The East Asian Experience,” National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan, 28 November. Ohno, Kenichi (2005) “Vietnam and Thailand: Coping with Regional Integration and Chinese Challenge in Different Ways,” National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan, 24 March. Okimoto, Daniel I. (1989) Between MITI and the Market: Japanese Industrial Policy for High Technology. Stanford, CA: Stanford University Press. Ozawa, Terutomo (2002) "The Hidden Side of the 'Flying Geese" Catch Up Model: Japan's Dirigiste Institutional Set Up and a Deepening Financial Morass." East West Center Working Papers. Economic Series, number 20, July. Painter, Martin (2005) “Managerial Reform and Political Control: The case of Thaksin and the Thai Bureaucracy,” City University of Hong Kong, Department of Public and Social Administration, draft manuscript. Pempel, T.J. (1998) Regime Shift: Comparative Dynamics of the Japanese Political Economy, Ithaca, NY: Cornell University Press. Phongpaichit, Pasuk (2005) “Thailand: Wide Angle,” Keynote speech, 9th International Conference of Thai Studies, University of Northern Illinois, 4 April. <http://pioneer.netserv.chula.ac.th/~ppasuk/papers.htm> Phongpaichit, Pasuk and Chris Baker (2007) “Thai Capital After the Asian Crisis,”

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1 The aim of the neoliberal problematic, as formulated by Tickell and Peck (2003: 21), is to trace the uneven expansion of neoliberalism over time and space, to specify the processes and mechanisms by which the doctrine spreads, to understand its different institutional forms, social consequences and opposing forces, and to examine the translocal policy networks that give coherence to the overall process. 2 The most comprehensive and systemic statement of the neoliberal problematic as it applies to cities can be found in Brenner and Theodore (2002). 3 The neoliberal state secures private property and market competition through legal monetary and policing institutions but refrains from further involvement in the economy because public intervention is believed to distort prices and benefit powerful interest groups (Harvey 2005: 2). 4 In the ideal typical case, a developmental state demands performance standards from business groups in exchange for subsidies and protection from foreign competition. The process is reciprocal and developmental because the state is strong enough to impose productivity and investment norms on enterprises receiving public support (Johnson 1982: 318). 5 Investment for high speed growth comes via a massive transfer of funds from household savings held by public institutions to domestic corporations, amounting to primitive accumulation via the state. Under these circumstances relatively equitable distribution of returns is required to maintain stability and political legitimacy. 6 Incentives go to many not one corporation in a given industry.(Pempel 1998: 54) 7 A full description of the research and findings from the earlier Thailand study can be found in Hill, Fujita and Wongtip (1999) and Fujita and Hill (2004). 8 In the 1950s, the U.S. strategic air command built long runways in Thailand as part of a China containment strategy. In the 1960s, the U.S.stationed troops in Thailand and used Thai airfields for military missions into neighboring countries. 9 During East Asia financial crisis in 1997/98, the IMF laid down conditions governments had to meet to receive over $120 billion in loans. The Fund did the same when financial contagion spread to Russia and Brazil (Weisbrot 2005). 10 The highway system was also designed to provide supply routes for the U.S. military. 11 Thailand signed a bilateral free trade agreement with Japan in April 2007, which will reduce tariffs in certain sectors to zero over a ten year period, and is attempting to negotiate a similar agreement with the USA. 12 The U.S. complains about Thailand’s high trade barriers on agricultural products, automobiles, alcoholic beverages, and electronic products, about inadequate protection of intellectual property rights, and about non-transparent customs rules and procedures (Ahern and Morrison 2005). 13 Faced with huge recapitalization needs in the Thai financial sector, government removed foreign ownership controls in October 1997 so as to allow foreign firms to hold a majority stake in operating financial institutions for up to10 years after which further capital increases have to be made by local investors until foreign held equity share falls to 49%. 14 Foreign participation is now allowed in telecommunications but that sector is still dominated by two state owned companies.

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15 The depreciation of the Baht depleted Thailand’s foreign exchange reserves and precipitated a steep decline in the stock and property markets. Plummeting stock and real estate values triggered a general economic downturn: GDP fell 10.3% between 1997 and 1998, exports fell by 6.7%, imports by 33%, and unemployment rose from 3.2% to 7.3% (Ahern and Morrison 2005: 3; Pasuk 2000). Foreign take overs and mergers with debt ridden Thai companies dramatically increased. (Pasuk and Baker 2007, Jetin 2007). 16 Japan accounted for 40% of net FDI inflow to Thailand in 2005, 33% in 2006 and 60% in the first quarter of 2007 (Thailand BOI 2007). 17 The following depiction of Japan’s applied of the East Asian development process is indebted to the work of Kenichi Ohno (2003a; 2003b; 2005). Ohno is one of Japan’s leading practitioners of applied development policy and his formulation of the Japanese “consensus view” is derived from “intensive discussion with Japanese officials, experts and scholars in the field of development…for the explicit purpose of projecting it to the rest of the world” (Ohno 2003a: 1). 18 Industrial policy is modeled on the product cycle and has 3 components: a policy for continuous upgrading from lower to higher value added industries and product segments; a policy for substituting imports with domestic production using technology acquired through licenses and joint ventures with foreign firms; and a policy to transfer comparatively disadvantaged products or product segments through direct foreign investment into nearby Asian nations where conditions are still suitable for such industries. The goods produced overseas are imported back to the investing country and the resources released from the contracting product sector are shifted to newly competitive sectors or product segments (Ozawa 2002). 19 In the AICO scheme, a minimum of two companies in two different ASEAN countries are required to form an “AICO Arrangement.” The output of the participating companies receives preferential tariff rates up to 5%. Tariff reductions apply to the physical movement of products (finished products, intermediate parts and components or raw materials) between the participating companies and countries, to resource sharing in marketing, management, training and technical assistance, and to industrial complementation. To qualify, participants must be incorporated and operating in any ASEAN country, have a minimum 30% national equity, and undertake one of the designated industrial cooperation activities. Eligible applications are certified by the ASEAN Secretariat (ASEAN 2006). The aim is to facilitate complementary divisions of labor, and intra-regional and intra-corporate trade in the ASEAN manufacturing industries (Fujita and Hill 1998: 318). 20 There is a tradition of fiscal conservatism in Thailand that goes back to the Kingdom of Siam, in which technocrats regard stability of exchange rates, prices and macroeconomic balance as more important than industry promotion and economic growth. The Thai technocracy is divided between conservatives in the Thai tradition, often with neoclassical economics training in the USA, and with close relations to the World Bank, and development economists and engineers, sometimes with training in Japan (Shimomura 2006: 17-18). 21 Forty-one percent of Thai’s work labor force works in agriculture, mainly very small proprietors; 26% in the urban informal economy; 15% in white collar jobs; 8% in the formal industrial sector (in factories with 10+ workers); and 10% other categories (Pasuk April 2005: 5). 22 There were two components to the development program: heavy and chemical industries that could take advantage of natural gas produced in the Gulf of Thailand; and export oriented industries.

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23 The Thai government initiated a second phase of infrastructure investment in the Eighth National development Plan (1997-2001), including a new international airport, and expanded the program to eight adjoining provinces. 24 Incentives include corporate income tax exemptions, tax deductions for utilities and new infrastructure, and reduced duties on capital goods imports. 25 According to the firm, Hermarj develops industrial estates, utilities, property and infrastructure for its corporate customers. The company currently manages 6 industrial estates, encompassing 13,000 acres, housing 348 customers, $12 billion in investment, and 50,000 employees (Hermaj Land Development Company 2007). 26 Japanese, American, European and Thai employees also organize their own social clubs in the estate. 27 Thailand is the world’s second largest market for one ton class small trucks, after the USA. Government targeted the small truck as ideal for a largely rural population, since the vehicle can haul sacks of rice and families with equal ease. To encourage Japanese to make pickups in Thailand, the government offered up to 8 year tax holidays, and sharply reduced excise taxes on pick up sales and import taxes on truck components compared to passenger cars (Arnold 2005). Thai tariff rates on passenger cars and SUVs is 80 percent, on motorcycles 60%, on completely knocked down auto kits 33% (Thai BOI 2007). 28 For a detailed contrast between the Japanese and American supplier systems, see Womack, Jones and Roos (1990: chapter 6). 29 Keiretsu supplier networks coordinated through supplier associations date to the 1930s in Japan and emerged as an instrument to collectively mobilize resources for a war economy. 30 Long term relational subcontracting enable Japanese assemblers to recognize supplier capabilities and knowledge, gives suppliers incentives to perform well to maintain the relationship, and provides suppliers with certainty to invest in R&D. Just-In-Time delivery helps the parent company economize on inventory costs and requires high delivery performance from supplier who also acts as an inventory buffer for the parent assembler. Supplier associations help speed their resolution of problems, serve as consultation forums on techniques, know-how, and cost reduction, and strengthen social relations among companies via sports, lectures, factory visits, and overseas seminars. 31 American subcontractors prefer market mechanisms and international standards to control suppliers. They have spun off parts of themselves into independent suppliers (e.g. Visteon from Ford Delphi from GM;). They have introduced QS9000, and ISO/TS16949 standards to Thailand, which help reduce waste and inventories, and serve as management control devices. Leading Western first tier suppliers, like Visteon and Delphi, require their second tier suppliers to meet these standards. American TNCs, like Ford, believe uniform international standards enable the flexible global procurement of parts, give assemblers greater negotiating power, lower procurement costs, and facilitate economies of scale. 32 AAT holds a yearly meeting with suppliers to discuss cost reductions. In addition, AAT suppliers have a “friendly association. They get together informally, with each company organizing the meeting on a rotating basis. Mazda didn’t ask its keiretsu suppliers in Japan to come to Thailand due to AAT’s competitive bidding policy. 33 Ford’s policy is to take bids from at least 3 suppliers and choose the least expensive option after approval from the Financial Management Department. In Japan, Mazda relies upon

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suppliers in its own keiretsu network. If they are not competitive, Mazda helps them improve. Japanese auto firms operating in Southeast Asia have tended to shift from keiretsu to cross-keiretsu networks where one parts firm may produce for more than one TNC (parent) assembler. This shift stems from the small markets in the ASEAN countries, the pressure to localize and the AICO regional policy discussed above. The keiretsu system is also starting to weaken in Japan where it is not uncommon now for suppliers to serve several customers not just the parent company. 34 The Japanese government subsidizes company retention of “lifetime” employees during economic downturns to dampen unemployment. 35 There are variations among Ford plants in the USA depending upon local labor contracts. Ford also retains institutional legacies from the Keynesian era, and the company moved in the Japanese direction for a time in the 1980s, but in recent years Ford has been re-emphasizing the importance of flexible labor markets. 36 Under the labor law passed in 1999, the Welfare Committee must meet at least once every three months, it must contain at least 5 employee representatives, and its purpose is to provide advice and make recommendations regarding provision of welfare to employees. AAT’s social wage, a provident fund; medical facilities but not medical insurance; a company retirement pension, a housing subsidy, and an annual leave of 6 days (that goes up one day a year after 10 years of continuous employment to a maximum of 24 days). 37 At the Southeast Asia regional level, Japan’s developmentalist influence can also be seen in the AICO regional development scheme. 38 Both the neoliberal and the developmental state use methods of economic intervention based upon market incentives. But for the neoliberal state this expresses a commitment to market like rule. For the developmental state it is simply a tool of planning. 39 For example, of the total parts procured in the Thai auto industry, 25% come from local firms, 45% from foreign controlled firms in Thailand, and 30% from imports. Local firms provide mainly low technology parts. High technology parts are provided mainly by FDI firms and imports. The raw materials used by the parts industry are all imported. TNC technology transfer to Thai firms is mostly limited to low value parts. Thailand’s weak educational system and scarcity in skilled labor make the transfer of high value, knowledge intensive technology more difficult (Ohno 2005).