1 Local systems of innovation in Thailand EU countries use innovation systems as development drivers, but Thailand (and others)

Box 12.1 Local systems of innovation in Thailand EU countries use innovation systems as development drivers, but Thailand (and others)

cannot just copy their systems. We have been mistaken in the past in trying to plant Western models; hence the need to establish our own innovation system. Thailand has all the pieces, but manages them poorly.

The education system in Thailand has deteriorated over the past three decades. Teachers pay less attention to students given other demands, and are not trained to encourage creativity. Student performance on national and international standard exams has declined noticeably. One main point is that policy-makers tend to think only about the modern sector, not the whole society. Innovation is present at the grassroots but is suppressed by Thai culture and governance. How to ‘open the lid’ is a key question. Western societies are much more equal and less dual. In Thailand, effort is needed to allow local innovation to prosper.

One example is in organic rice farming: by giving up chemicals, farmers have realized substantial increases in production, reduction in costs and reduction in labour time. They seek and use micro-organisms from forests for the best decomposition of biomass, control of insects and propagation of these organisms. In some areas, this has been initiated by farmers, but in many, it has been helped by researchers from the universities who can engage research and lab support and some degree of technical assistance for the farmers (who by culture will generally not themselves request it).

Innovation at the local level gets too little consistent attention. The modern sector innovation system managers overlook local innovations and the potential linkages in research and business development (e.g. national food supply chain and export). Organic rice is a perfect example of the potential of local development for export. Continuing failure to connect the modern system with the traditional rural system, and giving priority to the modern one, results in a widening gap which becomes at some point almost dangerous. One needs therefore to focus on the integration of the two systems, the modern and the local. It does not take much to foster local innovation and, in doing so, links between research and business enterprises are forged.

Based on the Report on Science, Technology and Innovation Systems in Indonesia, Vietnam, Philippines, Thailand, Malaysia and Singapore, IDRC (2008), led by R. Spence.

Sector policy Sector policies are a host of special fields of public policy and regulation. In

general, these are more oriented towards private sector services, where regulation should be as light and as enabling as possible of private and non- profit sector development, while insisting on competition and the rule of law. Resource and service sectors dominate the economies of less advanced developing countries. Within resource sectors, the development of agriculture and food processing are particularly important, and are constrained by many factors that challenge public policy and action, such as a capacity for agricultural research and effective extension, local and global market

POLICY

concentrations, and developed country protection of its agricultural markets. Other readily exportable resources, like timber, diamonds and precious stones or metals, petroleum or uranium, are a boon when managed well, but

a curse when mismanaged, since resource revenue pushes up a country’s exchange rate and undermines other exports. Principles of good resource revenue management include: establishing a transparent public royalty at a level that is low enough to stimulate production and export but keeps enough for the public purse; using public royalty for public investment, particularly in infrastructure, education and health; and ‘sterilizing’ revenues as needed – parking them in good financial instruments offshore and bringing them in gradually as good investment projects are developed. This kind of policy set minimizes exchange rate appreciation while building market capital, infra- structure and skills. The major challenge remains moving from governance by theft to a serious development path, and realigning domestic and foreign interests involved in revenue mismanagement.

In the manufacturing and service sectors, it has become common wisdom that governments are not good at ‘picking winners’ in terms of particular goods and services and companies. Governments do, however, finance production inputs such as labour (education or human capital), knowledge (R&D activities) and infrastructure. Industrial policy is therefore more than just the innovation policy described above (measures to put new ideas into practice in both the private and public sectors). The emphasis of public support for private innovation in most countries is on areas of economic growth, particularly where export-led economic growth is strong. Chile’s industrial policy has, for example, focused on the export sectors of mining, forestry, salmon, horticulture and wines. In contrast, a human development perspective emphasizes the need for public policy to pay attention to innovation possibi- lities among people whose economic prosperity and other freedoms are particularly limited.

As we will examine later, many of the sectors (resources, manufacturing and services) are mixed in terms of investment, spending or management. The share of public and private involvement varies among countries. The next sub- section elaborates more on the public participation in the service sector.