Kaesong Industrial Complex

My case lead for the ICMC Case Study Conference in Greater Noida at the end of November has been accepted. I think this will be the sixth time I have visited (and once the airport was occupied and I had to miss it) (more information is availalbe at:
http://www.icmc.org.in
). Here is the case summary:

The border between North and South Korea is one of the most intensely contested in the world; periodic outbreaks of violence have punctuated the sixty years since the Korean Civil War was calmed by a ceasefire. The increasing inequality across the border, as the South has become a successfully developed capitalist country and the North has regressed into poverty and hunger, acts as a further stimulant to disorder. To reduce tension and promote cooperation, the South Korean government proposed various joint cross-border economic ventures, the most persistent and successful of which has been the Kaesong Industrial Complex, involving Southern capital and knowhow and Northern labour and land. The venture has been successful in terms of employment generation and production volumes but it has been bedeviled by political and managerial problems. Who are the major stakeholders in this case and how should success for them be measured?

Keywords: cross-border ventures, Kaesong Industrial Complex, Korea, stakeholders

Consciousness of Social Responsibility at the Map Ta Phut Industrial Estate and Pollution Management

This paper (by Supaporn Pinyochatchinda and myself) has been accepted for presentation at the forthcoming ICGBE to be held in Bangkok in June this year.

Abstract:

Map Ta Phut is one of Thailand’s largest and most important industrial estates and one that has had a reputation for housing some pollution-producing factories. Although the Thai state has acted to implement various regulations aimed at curbing such pollution, such regulations can only really be successfully enacted when the people involved – employers and employees alike – understand the purpose of such regulation and are willing to internalize the requirements upon them that it implies in their daily practices. Effective pollution control requires compliance at all levels of operation. To investigate the extent to which people have internalized these actions, this research study conducted quantitative research with a sample of 532 respondents (380 employees and 152 executives or managers) in companies located within the industrial estate. Questionnaires were designed with a view to exploring the validity of a pollution management model that incorporates Context, Input, Processes, People, Society, Economy and Technology (CIPPSET). Results indicate that while most companies scored reasonably well for social consciousness of the issues involved, there are variations in the results which are indicative of persistent problems in the estate. These results are explored and discussed and conclusions and recommendations drawn from them.

Keywords: industrial estate, pollution, pollution management, Thailand

Supaporn Pinyochatchinda and John Walsh

Review of Alision Wee Siu Hui’s Assembling Gender

Malaysia’s period of rapid economic development was based, in common with a number of other East and Southeast Asian nations, on entry into the factory age. Malaysia was different from Korea and Thailand in that this entry coincided with decolonization and also took place against a background of potential ethnic conflict – conflict which has largely been avoided in a society in which extensive police powers have been evident and in which some elements of democratization withheld from the people.

Read the full review here.

Bangkok and the Regions: Part II

The first industrial estates were built in Minburi, in the vicinity of Bangkok, with the assistance of the World Bank. Estate management was placed under the responsibility of the Industrial Estate Authority of Thailand (IEAT), while the Board of Investment (BOI) was established to oversee inward investment in the Kingdom and to provide incentives to encourage investors to move their projects to the designated industrial estate spaces.

The initial agglomeration of industrial estates close to Bangkok soon produced various problems, including traffic congestion, public health issues, the growth of slums housing workers and family members and the increasing issue of uneven development and rising income inequalities. Subsequently, therefore, the BOI has adopted a more sophisticated regime of incentives aimed at encouraging investors to locate their projects in all regions of Thailand. This has involved dividing the country into three categories and awarding different levels of incentives for each (see below).

Import duty on machinery – 50% reduction or exemption

Corporate tax exemption – up to 8 years

Import duty on raw or essential materials used in manufacturing of export products – exemption up to 5 years

Double deduction from transportation, electricity and water costs – for Zone 3A (in) and Zone 3B

50 percent reduction of corporate income tax for 5 years – for Zone 3A (in) and Zone 3B

Deduct the project’s infrastructure installation or construction cost – Zone 3

Duty on raw or essential materials used in the manufacturing of domestic sales – up to 75% for Zone 3 (in).

The degree to which the dispersion of industrial estates has been successful may be determined by the number of such estates now existing and their characteristics. The IEAT lists two estates in the northern region (at Lamphun and Pichit) and two more in the southern region (at Songkhla and Pattani), while there are 37 listed in Bangkok and the central region.

This is not particularly surprising because the physical infrastructure, including transportation infrastructure, is greatly superior in the central region and that facilitates access to both suppliers and markets, as well as opportunities to network with stakeholders and potential partners. Although the transportation infrastructure has been improved in recent years as part of the Asian Highway Network project, together with the projected building of a railway network using Chinese capital, it is likely to be some years before the cost/return equation makes it logical to relocate away from the centre and towards peripheral areas.

An emphasis on regional income inequalities has become a more prominent part of the political discourse since the election of the Thai Rak Thai government in 2001 and intensified as part of the protests against the 2006 military coup and subsequent military violence against pro-democracy protestors in Bangkok. This resulted in all leading parties in the 2011 general election proclaiming policies that would increase the minimum wage for all workers and improve the quality of life in different ways for people throughout the country. The extent to which these manifesto promises will eventually be brought in practice remains to be seen.

Bangkok and the Regions: Industrial Geography (Part 1)

Continuing with my plan to write up the notes for the ICTS paper and then post them section by section, I am going to make a few observations here on Bangkok and the regions of Thailand.

It is clear that Bangkok has throughout its history (after having been designated the new capital after the destruction of Ayutthaya in 1767) been by a considerable distance been the largest and most significant city in the Kingdom. All principal political, monarchical, religious, cultural and economic institutions have been concentrated in this capital city. It is, in McGee’s influential description, a ‘primate city,’ in the same way that other large cities in Southeast Asia are also primate cities (e.g. Saigon/Ho Chi Minh City, Jakarta, Manila). However, after the era of European colonization inspired processes of modernization and industrialization, existing primate cities were in many countries superseded by colonial headquarters. Colonial headquarters had the benefit of modern methods of administration and market operations aimed at extracting resources from the colony and redistributing them for the purposes of the colonizing power (which is why so many such cities are located in ports) and they quite often supplanted in importance the previous capitals, despite not having the sacral or legitimatizing institutions within them. Hence, the effective capital (e.g. Yangon/Rangoon) becomes distinct from the formal but disempowered old capital and residence of the aristocratic/monarchic elite (e.g. Mandalay). However, according to Evers and Korff, Bangkok was put through this process not by foreign colonists but by its own elites:

“In Siam it was not a foreign elite introducing these changes in the economy and administration which are the characteristics of colonialism, but an indigenous elite. The reason for embarking on this course was not colonial intervention, but the conditions when the new Siamese state was forming some two hundred years ago, which enforced the development of an outwardly oriented state, integrated into trading relations and instituting the production of goods for use in trade (Evers and Korff, 2000: 33).”

As a result of these processes, they argue, a plantation economy was established in the early C19th and a functioning provincial administration by the end of that century. This has meant that Bangkok has become a ‘sacred city in which traditions were conserved’ and this in turn has had significant impacts on the development of nationalism in Siam and now Thailand. Hence, when in the years following the Second World War new efforts at rapid modernization were being laid, it seemed natural that Bangkok would be central to the economic industrialization of the country. After all, it led the country in every other way and was central to all important developments.

 The creation of plans for economic modernization followed the same principles: top-down, issued by the central authorities for the benefit, by and large, of the centre. The National Economic and Social Development Board (NESDB) was formed to develop and implement five year plans, National Economic and Social Development Plans (NESDP) by the means of which industrialization would proceed. When the NESDPs began to consider as an issue of urgency the location of industrial estates, therefore, it was in the vicinity of Bangkok that they would be located.

Is There Anything Thai about Thai Industrial Estates?

As part of the paper presentation I gave at the recent International Conference on Thai Studies, I concluded by posing the question whether there was anything especially Thai about the industrial estates in Thailand. Since I only had a minute to conclude, I rather threw away this point and then, asked about it later, I did not have chance to develop a proper answer. Consequently, I will make a few observations here as to what I would have said, given additional time.

The question concerns whether there are cultural issues that differentiate industrial estates in Thailand compared to industrial estates anywhere else. My answer is no, on the following grounds:

-          The industrial estate concept is an international one that has been put into practice in numerous countries around the world and essentially in the same method. It is a market-based model of operation and, as such, has little room for cultural variation.

-          Most firms are internationally owned (primarily Japanese) and domestic investors are, these days, largely controlled and managed by executives who have received international business education. The success of the modern business school is such that best practice has become known, understood and used in schools in nearly all countries. Again, best practice – which largely comes from the USA with Japanese workplace and organizational management technology added – is technocratic in nature and has little scope for incorporating cultural aspects.

-          Workplace conditions are largely based on international norms as espoused by the International Labour Organization and, even when important conventions on freedom of association and collective bargaining have yet to be ratified by the Thai government, employment conditions in modern manufacturing are conducted according to capitalist logic.

Industrial estates are spaces in which special forms (or relaxations of) law are put in place for the purpose of achieving specific developmental goals in the sphere of economics. If anything, therefore, cultural practices are more important outside industrial estate spaces than within them.

The 11th Conference on Thai Studies

I will be away for the next three days at the 11th Conference on Thai Studies, which is being held at the Siam City Hotel here in not so sunny Bangkok. I am going to give a paper on Industrial Estates in Thailand. This is the title and abstract:

The Industrial Estates of Thailand: Places, Processes and People

Abstract

The industrial estate, which distorts both place and market conditions, exists in various forms to promote desired economic activities in preferred locations. It is a target for inward investment and a goal for workers, especially factory workers, while also being a place that enacts state-mandated developmental goals in transforming the economy from an overly significant agricultural base. Within its borders, contestation has occurred between capital and labour, between stakeholders and polluters and between state and commerce. It is in the estates that Thailand’s transition and, perhaps, out of the East Asian Economic Model (import-substituting, export-oriented low labour-cost competitive manufacturing) has to a considerable extent taken place. Yet the nature and structure of the activities and practices taking place within the estates remains under-explored from a variety of academic approaches. In this paper, an attempt is made to remedy this lack to some extent by delineating the nature, extent and structure of industrial estates in the past and present and also suggests ways in which they might vary in the foreseeable future as Thailand seeks to exit the Middle Income Trap into which its manufacturing base has now brought it. Comparisons are made with the industrial estates of Europe and of China, which offer valuable data concerning the organization of labour and the means of converting manufacturing into higher value-adding activities. It is then possible to address the question of whether Thailand’s industrial estates are in any way unique.

Keywords: labour, industrial estates, economic geography, Thailand

AAMJ: Managing the Industrial Estate (call for papers)

The call for papers on Managing the Asian Industrial Estate is now live at the website of the Asian Academy of Management Journal. More details are here. I mention of this because I am the guest editor for this issue.

Do, please, let me know if you have any interest in submitting a paper.

Call for Papers: Managing the Industrial Estate in Asia

Asian Academy of Management Journal Special Issue: Managing the Industrial Estate in Asia

Guest Editor: John Walsh, Shinawatra University (jcwalsh@siu.ac.th)

Motivation and Overview

Much of developing Asia has achieved or is achieving rapid economic development based on import-substituting, export-oriented low labour cost manufacturing. The location of these activities is usually an industrial park of some sort, whether designated as special economic zone, export processing zone, science and technology park or some other name. These areas seek to provide financial or infrastructural incentives to domestic and international investors to locate their investment projects in specific areas so at to promote potential synergistic agglomeration of activities or regional development. The Special Economic Zones of coastal China have demonstrated the vitality of the system, while also showing that it is not sufficient simply to provide space and wait for investors to arrive. The emerging industrial areas of Cambodia seem likely to follow the model of neighbouring Thailand in facilitating the suppression of wage rates as a means of ensuring competitiveness. In developed nations, industrial estate regions represent areas in which industrial clusters can be fostered and encouraged with a view to progressing towards the knowledge-based economy that is considered to be a feature of future sustainable development.

Yet in developing Asia in particular, the management of industrial estates, broadly defined, remains an under-researched area and one which is approachable through a variety of disciplinary and multi-disciplinary approaches. Areas of interest include but are not limited to the following:

• State agency approaches at national or regional level to provision and management of industrial estates and the relationship with developmental goals
• Competitiveness and infrastructure provision for industrial estates
• Labour market issues
• Environmental management of industrial estates
• Promoting synergy among industrial clusters and networks
• Greening industrial parks and environmental sustainability
• Industrial estates as products to be managed and marketed
• Linking the industrial-manufacturing activities of the future

Submission Guidelines and Important Dates

All contributions will be subjected to at least a double blind review process. There should be a separate title page, indicating the names and addresses of the authors. Please submit original manuscripts which observe the AAMJ published style preferences [kindly click FOR AUTHORS and SUBMISSION for submission details]. Manuscripts must be sent electronically to the special issue editor (jcwalsh@siu.ac.th) no later than 15 October 2011. Contact the special issue editor for further submission instructions.

Map Ta Phut as an Exemplar of the Industrial Estates of Thailand

Announcing:

Pinyochatchinda, Supaporn and John Walsh, “Map Ta Phut as an Exemplar of the Industrial Estates of Thailand,” paper presented at the 4^th International Colloquium on Business and Management (Bangkok: January, 2011).

Abstract:

The industrial estate has played an important part in the post-WWII economic development of Thailand, representing a focal point for the inward investment necessary to promote the version of the East Asian Economic Model employed in the country. Industrial estates have also been influential in shaping internal labour migration and in determining which economic activities provide competitive advantage in export sectors. The presence of the estates has not, however, been entirely positive since migration is often associated with social issues, because of excessive industrial pollution and because they made profitable otherwise unprofitable and undesirable activities. One of the largest and most significant industrial estates is that of Map Ta Phut, which is located on the eastern seaboard of Thailand. This estate has become particularly strongly linked with the presence of industrial pollution and with the protests of local residents who claim their health has been negatively affected by the various factories and facilities involved. This paper adopts Map Ta Phut Industrial Estate as an exemplar of all industrial estates of Thailand and uses it to identify the various characteristics and individualities of the Thai version of this institution. By doing this, lessons are drawn for both business practitioners and policy-makers concerning the regulation of pollution and other administrative activities, together with forward planning for employment and labour market upgrading.