Thailand Industry Transformation: Thriving in the New Age of Global Capitalism

1. OIE Forum 2010 Thailand Industry Transformation: Thriving in the New Age of Global Capitalism SuvitMaesincee Sasin Institute for Global Affairs (SIGA)

2. Civilization in the Making Between 1000-1800 21st Century 19th Century Society Static Growth Dynamic Centricity Local International Transnational Community Rural Urban Virtual Pace of Change Months Days Seconds

3. Globalization changes the State of Nature Country A B C Nation-State Company People Solid Modernity Liquid Modernity • Connectivity • Interactivity • Mobility • Virtuality

4. Required New Mindset & Skill Set • New Axioms Philosophy Conceptual Design • New Set of Critical Issues • New BIG “P” Paradigm Principles • New Economic Architecture • New Industry Portfolio Mechanism Design • New Business Model Practices • New Bundles of Competencies • New Enabling Infrastructure

5. Thailand Industry Transformation: Thriving in the New Age of Global Capitalism • Global Structural Change • Challenges & Issues Facing Industry • Action Agenda for Driving Change

6. Thailand Industry Transformation: Thriving in the New Age of Global Capitalism • Global Structural Change • Challenges & Issues Facing Industry • Action Agenda for Driving Change

7. Perpetual Crises are a Normal State of Being The Commodity Price Bubble The Global Financial Turmoil The Dot Com Burst European Sovereign Debt Crisis The Global Economic Crisis The Asian Financial Crisis The Real Estate Bubble

8. For much of the next decade following the economic crisis, we can reasonably expect to see • A rise of economic • nationalism • A more expanded role • for governments • A much larger burden • of regulation • Weak global growth • Pressure from overcapacity • Persistently high unemployment • Volatility in the financial markets

9. Three Major Shifts • The Age of Philanthro-Capitalism • A New Global Middle Class • An Emergence of the Asian Century • Offshore Farming • Extreme Poverty • Wall Wide Web • Cyber War • Food & Fuel Security • Nuclear Terrorism • A Shift from the Century of Ideology to the Century of Identity • A Shift from the Century of Individuality to the Century of Commonality • A Shift from the Century of Prosperity to the Century of Security

10. From Century of Ideology to Century of Identity Century of Ideology Century of Identity Socialism State Capitalism The World Economy Capitalism Market Capitalism

11. Identity/ Representation Issues Capitalism • Washington Consensus Vs. Beijing Consensus • North South Trade Vs. East West Trade Citizenship • National Citizen Vs. Global Citizen • Local Culture Vs. Cosmo Culture Corporations • Indigenous Firms Vs. MNCs • Glocalization Vs. Grobalization • Closed Vs. Open Collaborative Platform Civil Society • Globalization from Above Vs. Globalization from Below

12. From the Century of Individuality to the Century of Commonality Regional Society Local Economy Global Environment Economy Society Environment Local Regional Global

13. These Multiple Realities are Multifaceted, Multilayered and Multi-Domained by Nature Economy Society Environment Local CSR New Growth Engine Low Carbon Society Multifaceted Food & Energy Security Asean Economic Community Regional The New USA Multilayered BRIC The Rise of the Rest G20 Global Civil Society Copenhagen Accord Global Multi-domained Philanthro-Capitalism/ Citizen Philanthropy Global Standards

14. From the Century of Prosperity to the Century of Security National Security Freedom & Equality Human Security Security Construction & maintenance of social & political order Management of uncertainty, risk & insecurity Laissez-faire Precaution

15. Globalization of Risk &Threats • Financial Turmoil • Economic Crisis • Pandemics • Climate Change Global • Terrorism • Mass Production • of Refugee • Extreme Poverty • Genocide • Civil War Local Local Global

16. The New World Order in the Making • Financial Turmoil • Economic Crisis • Commodity Price • Offshore Farming • New Global Middle Class • Extreme Poverty • Etc. Individual Identity Prosperity • Terrorism • Organized Crime • Pandemic • Cyber War • Pirates • Nuclear Proliferation • Food & Fuel Security • Etc. Global Common Security

17. The New Normal Management Paradox Competition Conflict Crisis Stock Unilateral Passive/ Reactive Collaboration Coherence Co-prosperity Flow Multilateral Proactive/ Preactive Level of Uncertainty Low High Low High Level of Complexity

18. Thailand Industry Transformation: Thriving in the New Age of Global Capitalism • Global Structural Change • Challenges & Issues Facing Industry • Action Agenda for Driving Change

19. Change in the World Economic Structure World Economic Structure Global GDP* % 75 Developed Countries The Rise of the Rest The Triad 50 Developing Countries The Rest of the World The Rise of Asia 25 1820 70 1913 50 73 2005 The Rest of Asia China/India

20. The spending power has already shifted away from the richest countries towards a growing middle income bloc By 2050, China and India will together, account for nearly 50% of the global GDP

21. The New USA 3,284 mil (50% World Population) 12,250 bil US$ (22% World GDP) ASEAN + 6 2,068 Mil (31% World Population) 9,901 bil US$ (18 % World GDP) ASEAN + 3 ASEAN 585 Mil (9% World Population) 1,275 bil US$ (2 % World GDP)

22. …This can help explain the boom in consumer products such as televisions and mobile phones throughout Asia As of 2007, India had more cell phone users than the United States, while China had twice as many

23. Car ownership rises as income grows • Automotive industry is growing at an • unprecedented speed in developing Asia, • with China, India, and the ASEAN economies • as the major growth markets for the Asian • automotive industry • By 2025 China could overtake the US as the • country with the most cars in the world— • around 200 million in all • Moreover, there will be flow-on effects across • the board--More cars mean more roads, more • demand for demand for insurance, more • service stations; more tourists mean more • aircraft, airports, customs officers, metal • detectors, hotels, and demand for souvenirs Number of Cars Owed From January through August 2009, more passenger cars were sold to Chinese consumers than to their American counterparts

24. Demand more and better services-- Education, Health, and International Tourism World Tourism is expected to double between 2004 and 2020 • International travel: as income increase • so does the incidence of leisure activities, • including international travel • Already in 2004, 20 percent of all • outbound tourism came from East and • South Asia • By 2020 the overall number of tourist • arrivals is expected to double to 1.5 • billion, with growing share coming • from developing regions

25. The Demographical Imbalance Developed Countries The First World The Second World The Third World Developing Countries Aging Society Dynamic Young Society

26. Demographic Challenges & Issues Facing Thailand Potential supportive ratio Shortage of Labor 7 Economic 6 5 Lower potential supportive ratio Socioeconomic 4 3 2 1 1:2:4 Sociological 0 2000 2020 2050 Source: Kua Wongboonsin

27. Four Southeast Asian countries are likely to face more severe consequences than the global average due to limited adaptive capabilities

28. Climate-Related Multilateral Arrangement Mexico Accord • Reduction of GHG Emission by both developed & developing countries; • Low Carbon Development Pathway; • Reduction of emissions through deforestation and degradation (REDD+); • Copenhagen Green Climate Fund & Technology Transfer. Emission Trading Adaptation Linkage to trade measures Nationally Appropriate Mitigation Actions (NAMAs) CopenhagenAccord Carbon Off-shoring Carbon Credits Numerical targets of emission reductions Finance REDD+ Carbon Leakage Sectoral Approach for Heavy Emitters - e.g. Steel, Cement, Electricity , Paper pulp …(possibly including agriculture sector) Technology

29. Global Forces & Trends Towards Low Carbon Society Citizens Government Business • Improvement of energy • efficiency to reduce costs • Voluntary emission reduction • for “green” image • Low Carbon, Technology- • driven • Environmentally Awareness / Go Green • Health Concern • Green Growth as a new economic growth engine • Stricter rules on “less green” imports & provision of adaptation support to maintain competitive edge of domestic industries. Change in consumers preferences - “Eco-buying” Manufacturing  Services Carbon leakage/off-shoring to developing countries?? Examples • Korea To become the World 7th Green Power by 2010 and 5th by 2050 • Japan Carbon Minimization in All Sectors • Toward a Simpler Life Style that Realize Richer Quality of Life • Coexistence with Nature • US, UK, China, India etc.

30. Environmental Climate Dimension (+) Climate Change in the Sectoral Context Double Winners Beneficiaries from Climate Change under Government Control Construction& Associated Sector Tourism Chemical Industry Mechanical & Electrical Engineering Renewable Energies Building Materials, Paper Industry Metal Industry Auto- motive Regulatory Market Economy Condition (+) Energy Sector (Fossil Fuels) Textile & Clothing Agriculture & Forestry Finance (-) Transportation Food Industry Beneficiaries from Government Measures with Climate Risks Double Losers (-) Source: DB Research

31. Are Thai’s Companies still fitting in ? Thai’s Companies ??? Green Green Green Green Global Supply Chain

32. TheThree Great Waves of Outsourcing The First Wave The Third Wave The Second Wave Manufacturing Services Food & Agriculture The Resources Battle --The world will demand 70 % more food by 2050, outstripping population growth

33. The Third Wave of Outsourcing-- Global Land Grab • China is buying up large tracks of land throughout Africa to produce bio-fuels and food • Indian companies have formed a consortium to invest in corporate farming of oilseeds in Latin America, most notably Uruguay and Paraguay • Cash-rich Arab and Asian governments are buying up arable farmland all over the developing world

34. Sectoral Shift GDPComposition (%) 2004 Source: DTN

35. Challenges & Issues Agriculture • Offshore Farming • Food & Fuel Security • Frugal Innovation • Scale Out Manufacturing Services • Service as Enabler • Service as Infrastructure

36. A company as a Bundle of Competencies System Lock-In Best Product Total Customer Solution Source: The Delta Project, MIT

37. Options for Strategic Positioning System Lock-In Dominant Exchange eBay Proprietary Standard Microsoft, Intel Exclusive Channel Rural Wal-Mart Low Cost Southwest Airlines Horizontal Breadth Fidelity Best Product Total Customer Solution Redefining the Customer Relationship Saturn Customer Integration EDS Differentiation Sony Wega Source: The Delta Project, MIT

38. Amazon.com System Lock-In Dominant Exchange • Just in time procurement • No sale tax • Very small return rate • The broadest • discounters in the world • Proprietary computer • systems • Information broker • between publishers • and readers Low Cost Horizontal Breadth • More than 1 • million titles Best Product Total Customer Solution • Virtual bookstore • Massive books • and information Differentiation Customer Integration Redefining the Customer Relationship • 24/7 availability • Book review and Recommendations • Eyes & Editors (personalized services) • Associate • Program Source: The Delta Project, MIT

39. Thailand Industry Transformation: Thriving in the New Age of Global Capitalism • Global Structural Change • Challenges & Issues Facing Industry • Action Agenda for Driving Change

40. Vision-Action Gap • Mindset • Skill Set Liquid Set • Governance Structure • Institutional Framework • Capacity Building • Operating Models Solid Set Solid State Liquid State

41. Thailand’s Trade & Industry Architecture Trade & Industry Policy Agriculture Market Access Manufacturing Capacity Building Market Penetration Global Dynamics Services & Tourism Market Facilitation Enabling Infrastructure

42. Regionalization of Thai’s Industry Production Service Resource Singapore Thailand/ Malaysia/ Indonesia/ Philippines/Vietnam • Rubber • Automotives • Tourism and Aviation • Fashion • Food • Education • Logistics/Transportation • Agriculture and Fisheries • Wood • ICT and Healthcare • Electronics • Financial Services • Energy • Construction Brunei Cambodia Laos Myanmar

43. Thailand as a Regional Hub Cultural Tourism Jewelry: THA,MYN,CAM Land Transportation: THA,MYN, LAOS,CAM,VIET,MAL,SING Food & Restaurant: THA Textile Automotives Rubber/ Leisure Tourism Aviation/ Education/ Healthcare

44. Using AEC as a stepping stone to enhance Thailand competitiveness in the global markets • The US/Canada • Western Europe • Japan/South Korea • China/India • Russia • Argentina/ Brazil/ Chile • Mexico • South Africa Advanced Countries Dynamic Countries AEC Emerging Countries • African Countries • Middle East Thailand

45. The New Market Space Advanced Developing Frugal Innovation Under-developing Scale Out Upper Middle Lower

46. Industry Space: the Convergence of Human & Technology Sector Business Level Product Agriculture Manufacturing Services Industry

47. The New Division of Labor Competencies Markets Products Ministry of Industry Ministry of Commerce • Sector Development • Business Development • Product Development • Market Access • Market Penetration • Market Facilitation

48. Industry Space: the Convergence of Human & Technology Sector Level Business Product People Agriculture Manufacturing Services Private Industry Public Partnership

49. Transforming towards a Balanced Industry Portfolio Economic Wealth Environmental Wellness Economic Wealth Environmental Wellness Social Well-beings Human Wisdom Social Well-beings Human Wisdom

50. Economic Wealth • Profitability • Return on investment • Growth • Customer satisfaction & retention Rebalancing Capacity Environmental Wellness • Resource/ energy use • Waste management practices • Water & air quality • Integrity of supply chain • Compliance with standards Economic Wealth Environmental Wellness Social Well-beings • Labor Practices • Maintenance of human rights • Impact on the Communities • Taking responsibilities for products Human Wisdom Human Wisdom Social Well-beings • Human value • Human creativity & value creation • Intellectual independence • Individual autonomy • Free culture