Foreign Direct Investment, Linkage Formation and Supplier Development in Thailand during the 1990s: The Role of State Governance

During the 1990s inbound FDI became a significant factor in Thailand's industrial transformation. At the same time there was increasing concerns about whether the new TNC-driven export industries actually contributed to the long-term competitiveness and a sustainable pattern of industrialisation in Thailand. This led in turn to the formulation of TNC-SME linkage policies as well as a set of broader SME and supporting industry policies to supplement unfolding liberalisation of trade- and investment policies. The article is concerned with the extent to which the Thai government was able to formulate and in particular implement a credible and adequate set of linkage and supplier development policies. It is generally argued that the Thai governments failed to implement such policies and thereby missed an early opportunity of supporting upgrading among Thai owned parts producers. Mistaken policies were mainly due to a range of politico-institutional constraints that may be in the process of changing under the present Thaksin government.