Many developing countries are trapped for decades in the so called middle income trap. While all agree that cutting edge infrastructure and independent teaching education system are critical to break this middle income trap, a elite serving, Thailand Development Research Institute (TRDI) argues, technology up-grade is also a critical need.
The elite serving TDRI, analyst Saowaruj Rattanakhamfu argues: (source)
Only technological upgrading – process upgrading, product upgrading, and functional upgrading – can help Thailand avoid the bottlenecks and dreaded dead-end of the middle-income trap faced by many countries.
Process upgrading is the simplest and quickest of the three. Many large companies in Thailand have opted for this approach to reduce waste, energy use and costs of production while increasing productivity. Just to give one example, Sabina, Thailand’s top three best-selling lingerie manufacturers, has adopted various forms of lean manufacturing, including Kaizen and multi-task training training. The results are less working space, shorter lead-time, and 40 percent less production labor while outputs sharply increase. By continually increasing its productivity, Sabina manages to survive the rise in minimum wages and even expand its operation into the ASEAN market.
Energy saving can produce another quick win, as exemplified by the case of SCG Paper. Long committed to environmental concerns SCG Paper recently installed a biomass dryer in a project by its subsidiary Phoenix Pulp & Paper. This 50-million-baht investment has saved 4 million liters of fuel oil, amounting to 43 million baht. The payback period is as short as a little over one year. While most Thai companies are not investing in R&D, our research has identified many that are. In fact, those that are undertaking R&D are doing better.
Some manage to develop innovative products and thus enjoy higher margins. For example, high value-added products resulting from SCG Building Materials’s intensive research command 20 percent higher profit than its commodity products Due to R&D, Saijo Denki, a Thai leading manufacturer and exporter of air conditioners, has transformed itself from a low-margin contract manufacturer to one with its own profitable brand. Its branded products earn 24 percent more profit than the unbranded ones. Even small companies, such as Silicon Craft Technology, can be innovative. Some of Silicon Craft’s radio-frequency identification (RFID) chips for animal tracking perform better than those of Texas Instruments, the U.S. giant.