Introduction
Today, leading giant auto-making companies are heading to emerging markets in the East Asian region. This is where countries like Thailand, Singapore, South Korea, and Taiwan are emerging as major producers of capital goods. The automotive industry is one such area where these Tigers have shown dominance in the ASEAN region commanding a market of more than half a billion consumers. In all aspects of these developments, goals go together with appropriate strategies. This essay presents a brief comparative analysis of the goals and strategies set out to lead the progress and development of Korea (South Korea), Malaysia, and Thailand in their way to attaining a developed status early in this century.
Korea
From simple motor vehicle assembly using imported auto parts from Japan and the United States earlier in 1955, today the Korean auto industry is the fourth largest in the world and the sixth-largest exporter by volume to the global market. “Sibal”, the first Korean auto company experienced growth and progress backed by the government’s “Automobile industry promotion Policy” in 1962 (Kim & Lau, 1994, p. 64)
The primary reason for its rapid progress was due to state monopoly and huge government and foreign investments. In Korea’s auto history, local companies have partnered with Toyota and General Motors among other foreign automobile manufacturers. Korea’s automotive production has increased to an excess of a million units annually in various models and brands, in the last 30 years. Korean strategies and auto goals involved the government’s investments in scientific institutions which laid the bases for its scientific infrastructure. In this setting, they acquired capital goods from foreign markets and studied them for imitation (Katz, 1993, p.83)
A peculiar feature of the Korean auto is its characteristic dependence on technology transfer and exchange of advanced skills and borrowed knowledge from developed auto industries in developed nations. From panel beating and body bonding from scrape vehicles imported from their manufacturing partners, the local workforce was able to assimilate low-cost technology and attain professionalized experience from repeated processes of doing the same pieces of work. The government proceeded to use trade tariffs as a protective measure to keeps the market against the influx of imported cars as its concentrate on production that would meet both local demands and leave a surplus for external sale (Vietor, 2007, p.6).
Malaysia
Perusahaan Otomobil Nasional (PROTON) was the first Malaysian automotive company. It came into existence after a joint venture between Heavy Industries Corporation of Malaysia (HICOM) and Mitsubishi Motor Corporation (MMC). In this agreement, Malaysian domestic companies received a 70% stake in PROTON while MMC got 15%. Demand for automotive was generally low and production fell short of the expected 5000 vehicles an annum. This was reflected in massive losses that PROTON recorded between the trading period, 1985 and 1988. This situation notwithstanding, with the government’s commitment to its industrialization plans and goals based on a global perspective, the company’s ultimate record of annual pre-tax profit of Rm. 32.6 million turning over automobiles and parts valued at the market rate of Rm. 820 million was the turning point for Malaysia’s auto production and trading in the world market. When it was faced with a downturn in 1998, the Malaysian government endorsed a bailout to its auto company in an arrangement which involved PETRONAS (Malaysian national oil company) acquire 27% of HICOM amalgamation at a cost of US$ 263 million (Hall, 1993, p.2)
Thailand
Thailand adopted a protective tariff system in its strategic plans and national goals aimed at making its automotive industry competitive, substantially, and sustainably productive both in the short run and in the long term. It imposed high levies on Completely Built-up (CBU) cars and Completely Knocked Down cars. While import duty on CBU was varied at the rate of 90%, the import tax on CKD was fixed at some 40% since it provided the raw material for its manufacturing companies. The signing of the ASEAN Free trade area adds to the speculative strategy of Thailand to prosper into a developed world status as promoted by the trade of locally manufactured cars affordably in the region (Hall, 2005, p.60)
Analysis and Recommendations
Korea
In Korea, industrial development has meant that the automotive industry is protected while still young. The adoption of protective tariffs to encourage consumption of local automobiles while limiting imports is healthy for the early stage of development since it breeds innovation and gives room for new experiments. Investor-friendly policies have particularly in the automotive industry, meant further growth and development as the local engineers assimilated adequate knowledge and skills to produce cars locally from imported scrap cars (CKD cars). Koreas joint initiatives with foreign automakers such as Toyota and Mitsubishi in an FDI framework is the real strength behind its goals (Bell & Pavitt, 1993, p. 2). The goals should involve the development and use of local manpower to direct an increase in GDP and subsequent economic growth.
Thailand
The opening of the ASEAN region means foreign companies’ FDI in Thai’s auto industry can both produce locally and sell affordably to the regional population and repatriate surplus to their home markets (Thailand Illustrated Magazine, 2007, par. 5). Thailand is suitably located in the middle of the ASEAS region and with the leading three giant car makers; Chrysler, Ford, and Mitsubishi investing in its industries, the government’s goal to attain a developed status by 2020 are almost certain as outlined by the Ministry Of Industrialization and the Thai council of national Development. The 10-year plan should include a window for government loans in case the industry runs into bankruptcy because of the great risks associated with such huge investments.
Malaysia
Malaysia boasts advanced technology and established companies like Proton and Perodua in a liberalized market economy. The emergence of Malaysia to contend with developed nations in the automotive industry is a stimulus to its entire economy as shown by its respective budget share. The nation needs to strategically control its production during slump as in the recent downturn through the balanced budget and controlled deficit. This is possible through central banks’ credit control that can keep the Malaysian market against inflation.
Reference
Bell, R.M., & Pavitt, K. (1993). Technological accumulation and industrial growth: Contrasts between developed and developing countries. Industrial and Corporate Change, 2(2).
Hall, R. (2005), “The 21st century board: structure, responsibility, assessment”, Journal of Leadership & Organizational Studies, 11(3):62-71.
Katz, J M (1993), “Market Failure and Technology Policy”. CEPAL Review: 81-92
Jing, K., & Lau, J. (1994): The sources of economic growth of the East Asian newly Industrialized countries. Journal of Japanese and International Economics 8 3, pp. 62–78.
Thailand Illustrated Magazine: Thailand on the course to becoming the “Detroit of Asia” (2007). Thailand Illustrated Magazine, para. 4-8: Web.
Vietor, R.H. K. (2007).How countries compete: strategy, structure, and government in the global economy. Boston, Massachusetts: Harvard Business School Press. pp. 26-44. Web.