Industrial policy and automotive development: a comparative study of Thailand and Czechia

ABSTRACT

This paper investigates the effectiveness of industrial policy, and the role of state capacity to implement it, by making a comparison of automotive development in Thailand and Czechia, the largest vehicle producers in Southeast Asia and Central and Eastern Europe, respectively. The development of the industry in both countries primarily relied on foreign investment, despite Czechia’s long earlier history of domestic automotive development. The countries, however, have used very different types of industrial policy. Thailand introduced a series of vertical (sector-specific) industrial policies, pursuing a proactive industrial development strategy with state intervention, continuing even under the restrictions on trade-related policy measures imposed by the WTO since 2000. In contrast, Czechia has employed mostly horizontal (non-sector-specific) industrial policies with less state intervention, influenced by the restrictions of the European Union. Although both countries achieved considerable output and export growth, Thailand has a deeper and more locally owned supply chain. Thailand’s imaginative use of de facto local content requirements in connection with its product champion policy is instructive.

KEYWORDS:

• Automotive
• industrial policy
• Thailand
• Czechia
• global production networks
• global value chains

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. http://www.oica.net/category/production-statistics/2019-statistics/[accessed, 7 September 2020].

2. Nevertheless, see Otsuka and Natsuda (2016) for an attempt at an econometric approach in a particular country (Malaysia).

3. See http://ec.europa.eu/competition/state_aid/legislation/provisions.html [accessed, 20 May 2019].

4. Ruggie referred to compromising between a free market system and domestic interventionism (including welfare state provisions) as embedded liberalism.

5. eg. LCRs started 25% for PVs and 20% for CVs (pick-up trucks) in 1973 and increased to 54% and 72%, respectively in 1994 (Natsuda and Thoburn Forthcoming).

6. http://www.thaisummit.co.th/en [accessed, 12 June 2018].

7. CzechInvest HP: https://www.czechinvest.org/en/Our-services/Investment-Incentives [accessed, 21 March 2018].

8. See www.autoklastr.cz [accessed, 15 May 2019].

9. See https://automotive.czechinvest.org [accessed, 15 May 2019].

10. One of us (Blažek) has been engaged for four years in the Czech National Accreditation Commission charged inter alia with power to (dis)approve any study programme prepared by Czech universities.

Additional information

Funding

This work was supported by the Japan Society for the Promotion of Science [15K03496,17KK0059].