Can industrial policy work? Evaluating LCRs in terms of GVC framework for the cases of Malaysia, Thailand and China in comparison with Korea

Abstract

This study analyzes the effective factors of LCRs for the cases of Malaysia, Thailand and China in automotive industry through GVC framework, and the implementation of LCRs in Chinas wind turbine industry as a supplementary case.

The study first examined what effects LCRs in Malaysia, Thailand and China in their automotive industry. For Malaysia, although local ownership and supportive policies are guaranteed by government, the lack of competition makes Malaysias auto industry competitiveness poor, so they are neither exporting strongly nor globalize their production, and the less export also makes vehicle manufacturers hard to achieve scale economics with a smaller domestic market to a great extent. For Thailand, they perform better than Malaysia in the export market, while due to the absence of local ownership and protective policies, foreign firms had taken over the whole domestic market and they do not own a self-owned brand, and they do not globalize their production either. For China, China is the most successful case among three countries, while protecting local manufacturers through restricting foreign ownership and policies, the government did not prevent competition in the domestic market, which made China succeed in the implementation of LCRs, for the market size, China owns a market with a big size itself, which makes it easier for producers to achieve scale economics. The effective element found in three countries are market structure, complementary policies and local ownership.

The paper also examined the factors that affect LCRs in Chinas wind turbine industry as a supplementary case, among effective factors of LCRs for automotive industry in China, supportive policies implemented by government is considered to be the most important one.