Skills and Upgrading in Southeast Asia
Chapter 2: The Political Economy of Technical Intellectual Capital Formation
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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