The word “innovation” tends to conjure up images of eager start-up entrepreneurs or, alternatively, that of global corporations endowed with R&D budgets the size of small national economies.
But as the world’s biggest buyers of goods and services, governments can play a starring role in the pursuit of knowledge-economy reforms.
Less vivid in our imaginations, but often just as active, governments seek to harness innovation as a means to enhance their country’s position in the new knowledge economy.
Government-driven innovation is not, of course, a new concept. Take France. In the 1960s and 1970s, it pushed for the TGV, the high-speed train that was then a radical idea. Around the same time, the French and British governments absorbed the development costs of the Concorde supersonic airliner.
In 1978, France’s national postal and telecommunications services started designing Minitel, one of the world’s most successful pre-World Wide Web online services.
In 2015, a survey by the OECD found that 80 percent of its member countries took measures to support innovation procurement, with initiatives in sectors as diverse as telemedicine, lighting, traffic management and energy. Of course, innovation itself is on the radar of many more states.
With its Smart Nation initiative, Singapore shines brightest among Asian countries on the 2017 Global Innovation Index (GII). In the MENA region, the United Arab Emirates defined innovation as one of the pillars of its transformation from an oil-based economy to a knowledge-based one. Case in point, in October 2017 the UAE appointed the world’s very first Minister for Artificial Intelligence.
Pushing innovation in smaller, domestic firms
The Gulf States are using their sizable oil & gas revenues to develop innovative sectors such as aerospace, semi-conductors and renewable energy, anchored around high-profile foreign investments.
In our working paper, “The Role of Demand on Innovation: Evidence from a Resource Rich Economy”, Elif Bascavusoglu-Moreau and I look at the particular case of Abu Dhabi and show that the Emirate could leverage public procurement to further spur innovation, especially among smaller, domestic firms.
We examined the data from the 2012 Abu Dhabi Innovation Survey (ADIS), a measure of innovation performance based on international standards. A total of 480 firms indicated whether they had introduced any new or significantly improved goods, services and/or processes in the four years prior.
They were also asked about their knowledge flows and whether their innovations had been borne out of private (B2B or B2C) or public demand (i.e. government contracts and tenders).
Amid other findings, our data showed that the smaller the company, the higher the impact of public demand on innovation. This suggests that public procurement has a role to play in stimulating innovation among small and medium enterprises, which comprise 88 percent of the Emirate’s home-grown firms. Larger firms are capable of generating their own innovation systems and are less influenced by related policies. However, public demand does uplift innovative local start-ups.
Government contracts as a carrot for innovation
In 2016, Abu Dhabi government spent around US$6.5 billion on goods and services alone, according to IMF data. Other non-specified expenditures on development projects amounted to around US$40 billion. An innovation-oriented public procurement policy could leverage these monies and enable the Emirate to transition into a knowledge-based economy more quickly.
Such a public procurement policy could be two-pronged. First, it could make it mandatory for any service or product provider to locally source whatever exists locally, a concept known as “local content”.
Norway is often cited as a model case study: When its offshore industry picked up in the 1970s, it developed a formidable indigenous energy service industry by requiring that government and international oil companies give preference to Norwegian goods and services (provided these were competitive based on predefined criteria).
Second, government could push innovation by setting high technological specifications for its projects. By doing so, it would create a “carrot” for local or even international players to develop new technologies, as this would be key to secure lucrative government contracts. Firms on the fence about investing in R&D, especially smaller ones, could be pulled in the right direction. Currently, Abu Dhabi’s procurement standards do not have any innovation-driving component. This means that for the most part, providers only need to bid lower to secure a contract. This is a wasted opportunity.
Read more at https://knowledge.insead.edu/economics-finance/governments-the-next-heroes-of-innovation-7621#vtSA85xulUBmEoQ1.99
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French MRO Revima to build landing gear facility in Chonburi
The French landing gear MRO provider has started construction of a new facility in Chonburi, Thailand
The facility will focus on Airbus A320, Boeing 737 and ATR family landing gears. It will be equipped with the latest state-of-the-art machines and will include all necessary special processes for full in-house repair & overhaul of landing gears.
The French landing gear MRO provider has started construction of a new facility in Chonburi, Thailand.
The 12000 m2 facility will employ up to 300 employees, and represents an investment of over 30 MUSD.
“We found Thailand to be a great choice due to its central location in Asia, its infrastructure, ease of doing business and workforce quality. Thailand will become our regional customer support hub for Asia-Pacific. Our objective is to deliver quality and customer service of the highest standards in the region to support our customers’ operations. We aim to have our facility fully certified and ready to ship to our customers by the first quarter of 2020.”
Olivier Legrand, President & CEO of Revima
Digitally connected from its machines to its technical documentation, warehouses, monitoring and customer communication systems, it will also be environmentally friendly, with zero rejection waste water management systems and advanced fire detection and suppression technology.
Hino To establish a development and production base in Thailand
Once the factory begins operation in 2021, Hino will first start off by producing vehicles for the domestic Thai market
Japanese motor Company to push forward with locally led manufacturing of best-fit products to quickly respond to customer needs in close proximity
Under this new setup, Hino will be constructing a new center in Bang Bo, Samutprakarn Province to consolidate and strengthen our product planning, development, and production functions for best-fit products in ASEAN.
The site has an area of roughly 400,000 sqm. Construction is scheduled to begin in July 2019 with operations to begin in 2021.
The new center will consist of the new plant’s production area, and a development area centered around a test track. The total investment amount is expected to be roughly 11.5 billion yen.
Operations to begin in 2021
Once the factory begins operation in 2021, we will first start off by producing vehicles for the domestic Thai market, and expect to begin supplying ASEAN best-fit vehicles to other emerging markets by roughly 2024.
Hino Motors, Ltd. (HQ: Hino City, Tokyo, President & CEO: Yoshio Shimo; hereafter “Hino,”) and Hino Motors Manufacturing Thailand, Ltd. (HQ: Samrong, Samutprakarn Province, President: Somchai Pleankaew; hereafter “HMMT”), our manufacturing company in Thailand, in order to achieve our vision of “Corporate strategy 2025” and enable us to respond to customer needs in close proximity, will be taking steps in Thailand, one of our key centers of operation, to accelerate our efforts to strengthen our business foundation in ASEAN.
By newly appointed Mr. Somchai Pleankaew, who has an exceptional career background with Hino, to president of HMMT, we will be creating an organizational setup that will enable us to drive our business in a locally led manner.
Mr. Somchai Pleankaew, who assumed the office of president of HMMT as of Feb 1 has this to say:
HMMT will put all of our effort to make this project successful in order to enable the growth of our company. Our aim is to serve all customers to their greatest satisfaction by providing the best-fit products and total support customized for each vehicle.
In addition, as a center of Monozukuri, including product planning, development, and production, as well as Total Support in ASEAN, Hino Thailand will collaborate and go forward with Hino in ASEAN in order to grow and strengthen together to support the growth of our customers’ businesses in the ASEAN region.
The Hino Group will be reforming its business structure to achieve sustainable growth leading up to 2025. We position Thailand as one of our key markets for sales in the ASEAN region, our second pillar after the Japanese market. The country is also one of our key business centers and a driver of Monozukuri and Total Support within the region.
The new center to be constructed will consolidate and strengthen our product planning, development, and production functions in Thailand.
New center overview
|Name||Suvarnabhumi Monozukuri Center|
|Location||Bang Bo, Samutprakarn Province|
|Site area||400,000 sqm|
|Functions||Product planning, development, and production of Hino vehicles|
|Products produced||Light- and medium-duty trucks and buses|
|Operation startup date||Scheduled for 2021|
|Employees||Approx. 1,300 (at the time of operation startup)|
As a “Monozukuri Center” it will be designed with the capability to commercialize and supply ASEAN best-fit products locally and consistently. In addition to increased coordination between different functions, we will be taking steps in product development to push forward with localization of product development by upgrading organizational setups and constructing a new test track so that we will be able to respond to customer needs quickly and accurately at close customer proximity. In the area of production, the production functions that are currently distributed across existing plants in Thailand will be consolidated at the new center to improve production efficiency.
Furthermore, know-how from the Koga Plant―our global mother plant―will be actively incorporated into the plant to create a system that will enable us to deliver competitive products to our customers in a timely fashion.
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