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Elements of a Knowledge Based Development Strategy

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Productivity can make a big difference. ... An increase to 5% means doubling in 14 years. ... This is creating a virtuous spiral, a self-fulfilling prophecy. ... – PowerPoint PPT presentation

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Title: Elements of a Knowledge Based Development Strategy


1
Elements of a Knowledge Based Development Strategy
  • World Bank
  • NESDB
  • January 29, 2007

2
Overview
  • Productivity can make a big difference.
  • Recent per capita GDP growth approximately 3.5-4
    p.a. means doubling in 18-20 years.
  • An increase to 5 means doubling in 14 years.
  • Can Thailand raise TFP growth from about 1 p.a.
    to 2.5 p.a.?

3
Sources of TFP Increase
  • Most of the recent increase from labor transfer
    out of agriculture, which is likely to decline.
  • Alternative sources are through innovation and
    efficiency gains in industry and services.
  • Exploiting these sources to the fullest will
    determine whether growth is in the 4 range or in
    the 6 range.

4
What Are the Big Challenges?
  • Many electronic products becoming commodified and
    backward and forward linkages into higher value
    adding activities not occurring.
  • FDI not promising a wave of new industry which
    could accelerate growth and lead to spillovers
    for industry.
  • Local industry not diversifying rapidly into new
    products or moving into higher quality end of
    existing products.
  • China factor and on the horizon, the India factor
    calls for finding new focii of competitive
    advantage with long-term prospects.

5
China Economic Shock Is Unprecedented
China,

China, Maddison 1978-2003
United Kingdom, 1820-70
United States, 1820-70
Percent
Initial share
4.9

5.2
1.8
Annual growth
7.5
2.1
4.2
World growth
3.1
0.9
0.9
Excess growth
4.4
1
.2
3.3
Number of years
25
50
50
6
And Greater than Other Post-war Growth Spurts
Percent of world GDP
16
China
12
Japan
8
Germany
4
South Korea
Taiwan, China
0
1
3
5
7
9
11
13
15
17
19
21
23
25
Years since turnaround
7
Product structure of exports
Japan
Korea
China
India
100
80
60
40
20
0
1965
1975
1985
1995
2003
1965
1975
1985
1995
2003
1987
1995
2003
1975
1985
1995
2003
Medium-skill and technology-intensive manufactures
Labor- and resource- intensive manufactures
Electronics
Low-skill and technology- intensive manufactures
Primary commodities manufactures
High-skill and technology-intensive manufactures
8
What Fuels Chinas Advance?
  • Readiness to learn and great effort to transfer
    technology and groom Chinese firms.
  • Dynamic and wealthy urban middle class, source of
    demand. Offers potential for domestic businesses
    to mature, innovate, and launch new products.
  • China acquiring reputation as a success story,
    creating a buzz. Leading foreign companies view
    their future prospects as being tied to success
    in the Chinese market. MNCs transferring
    production and research to China. This is
    creating a virtuous spiral, a self-fulfilling
    prophecy.

9
Economic Symbiosis between China and Southeast
Asia
  • Rest of East Asia produces and exports mainly
    components, capital goods, and raw material.
  • China focuses on assembly.
  • Trade balance favors rest of East Asia.

10
Economic Symbiosis
11
Can the Symbiosis Persist? Is This a Positive-Sum
Game?
  • Possibly not because manufacture of components
    and capital goods also shifting to China.
  • Advantages of proximity to assemblers
    especially for high-tech products with
    innovation.
  • Location of RD activities in China and FDI in
    upstream activities continuing. If the symbiosis
    begins to dissolves, what then?

12
What Does This Imply for Asia
  • Building competitive advantage in new areas and
    shifting resources.
  • Relying on innovation and productivity-led
    growth.
  • Pursuing regional or global scale of operations
    in manufacturing and services.
  • Fully exploit size and openness of Chinese market
    through trade and FDI.

13
Policy Agenda for Future Knowledge Economy
  • Over 10 years, significantly improve quality of
    primary and secondary education, especially the
    provision of science, math, and English language
    skills. Thailand should aim to be in the top ten
    by 2015.

14
Policy Agenda for Future Knowledge Economy
  • Take steps to make at least two universities in
    Thailand among the top 15 research universities
    in Asia and at least one should be in the top 50
    in the world.

15
Policy Agenda for Future Knowledge Economy
  • Develop at least one world class research center
    which uses biotech to promote innovation in the
    agro-food industry. This should be comparable in
    quality to ITRI and aim for comparable spillover
    effects in terms of assistance to small firms and
    new starts. Institute would form alliances with
    leading international food companies such as
    Nestle.

16
Policy Agenda for Future Knowledge Economy
  • Make one or two design schools/institutes among
    the top ranked in the world, equivalent to Pratt
    in New York or other schools in Milan and Paris.
  • Draw lessons from Milan and New York and
    strengthen ties with their institutes.

17
Policy Agenda for Future Knowledge Economy
  • Work with firms in agro-food processing, creative
    industries, and garments industries to raise RD.
    Provide subsidies for internships for SE
    graduates and design school graduates to work in
    these industries.
  • Offer strong incentives to firms in food
    processing/biotech to locate research centers in
    Bangkok.

18
Policy Agenda for Future Knowledge Economy
  • By 2015, Thailand should, in coordination with
    local firms, increase its RD spending to 0.6 of
    GDP and double their patents registered at the
    USPTO.
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