Systemic Vulnerability and Sustainable Economic Growth

Systemic Vulnerability and Sustainable Economic Growth

Skills and Upgrading in Southeast Asia

Bryan K. Ritchie

For many developing countries, economic growth is an elusive quest. Both economists and policymakers have long known that issues such as education, investment and infrastructure are necessary ingredients for development and yet only a very small number of countries seem to be able to come up with the right mix of these ingredients. Bryan Ritchie demonstrates how political relationships among government, business, academic and labor leaders create different incentives for economic actors to make key decisions to promote economic upgrading and sustainable development.

Chapter 2: The Political Economy of Technical Intellectual Capital Formation

Bryan K. Ritchie

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics


By the beginning of 2000, the hard disk drive industry in Thailand and Malaysia was changing. Efforts to upgrade operations in both countries ran into a long-standing problem of a lack of qualified, skilled workers. Components that could be created more cheaply were moved to lower-cost countries, such as China. Those that required higher-technology processes were moved back to Singapore or even to the USA and Japan.1 Thailand and Malaysia were caught in a vice, neither price competitive with China nor technologically competitive with Singapore. In the space of less than a decade, over 30 000 jobs moved from Thailand and Malaysia to China. All the evidence suggests that for many years both the Thai and Malaysian governments were aware of severe deficiencies in skilled labor. Why did both countries inadequately address the shortfall? This book argues that coalitional pressures on the ruling elites during earlier institutional formation created a system unable to respond to these emerging needs. These institutions, supported by similar coalitional configurations, also crippled policy responses designed to overhaul the system. Where did these coalitions come from and how did they influence policy decisions? Systemic vulnerability creates preferences for coalitional size and levels of participation. Broad and participative coalitions increase incentives to create institutional structures that facilitate collaborative and productive public–private linkages that drive innovation and upgrading. When coalitions are narrow and disconnected from policy making, incentives exist to create institutions that encourage redistributing resources from the general population to a select few, which hinders processes...

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