A4 Report Template - CII

Exhibit 6j. Thailand’s government policies played critical role in developmentof HDD industryThailand’s HDD cluster spans fullproduction value chain...... with close cooperation betweengovernment, industry and universitiesAcademia KMITL KMUT Khom Kaen Chulalongkorn Suranaree AIT Thai-German Inst.HGA/HSA/HDDassembly Hitachi GST Fujitsu Seagate Western digital Union technologyBase PlatesAltum PrecisionWearnesPrecisionBayonicsShineiMMI PrecisionOther activities Gem City Engineering Thai Inter Calibration Other PrecisionEngineering/IntegrationService ProvidersGovernment NSTDA BOI MOI Thai EEIAssociations ECEA FTI IDEMAOverseas DSI (Singapore)Suspension KR Precision MagnecompFlex assemblyMektecManufacturingInnovexPEMSTARMotors Minebea Nidec Electronics TDK JVC ComponentsFirm cooperation Leading HDD firms formed IDEMA Thailand topromote HDD domestic cluster developmentGovernment cooperation Coordination between IDEMA and Thai Board ofInvestment (BOI) makes HDD a “prioritized” industry Firms receive tax incentives in return for domesticinvestment in skills and technology development– Eg, one extra year of tax exemption in returnfor establishing an R&D center within 3years of1operationEducational cooperation Universities and companies coordinated to developan educated and efficient labor force• Thailand became largest global exporter of HDD• Thai HDD value add has risen from 30% to 45%• Thai HDD supporting industries grew by 20%Sources: IDEMA Thailand, The Roles of Intermediaries in Clusters by Patarapong Intarakumnerd, ITC development in Thailand.1Among other incentives and requirements as part of package.creased from 10% to 33% making Thailand the world’slargest HDD exporter 11 .Successful Offset PoliciesMany countries have used ‘offset’ strategy as a policy leverto build their defence production capabilities. Moresuccessful countries have looked beyond their defenceindustry to have a multiplier effect on the country’s manufacturingindustry through offset strategy. At the sametime many offset programs have failed to meet the statedor unstated objectives and local partners have been usedby global defence contractors to ‘pass through’ so calledvalue addition.India has embarked on a large scale modernisation of itsdefence forces and has put in place a stated offset policyto encourage local value addition. BCG has studied successfuloffset policies in different countries and has summarised10 best practices shown in Exhibit 6k. There aretwo best practices that merit emphasis. First, most successfuloffset programs have clearly articulated objectivesand very active government support to achieve these objectives.For example, if one of the objectives is to have amultiplier effect on the country’s economy, the incentivesystem for the defence contractor in form of credit fordifferent elements of capability development in the countryis designed in such a way to make this happen andthis is monitored closely. For example, in one programmethe defence contractor was awarded multipliers for R&D,investment and targeting SMEs as partners. Another interestinginnovation in the offset policy has been implementedby South Africa which separated the strategy/advisory and monitoring of impact on the country’s economyfrom the executing of each offset contract. While thelatter team is part of the Ministry of Defence, the formeris part of the Ministry of Trade Industry.Clearly, closer alignment between the different stakeholdersboth within the government and outside is criticalto get the maximum benefit for the economy fromsuch programmes.Developing the machine tools industryA strong machine tool industry is a critical building blockfor India to achieve its aspirations for the manufacturingsector. As mentioned earlier, Indian machine tools indus-11. IDEMA Thailand.Indian Manufacturing: The Next Growth Orbit 71